A top federal regulator called the failure of Silicon Valley Bank a 'textbook case of bank mismanagement' during a Senate hearing about what led to its spectacular collapse Here are five takeaways from Tuesday's hearing:
Federal Reserve Vice Chair for Supervision Michael S. Barr appears before the Senate Banking, Housing and Urban Affairs Committee in Washington, D.C., on March 28, 2023. The collapse of Silicon Valley Bank has sparked scrutiny from lawmakers who want to know what went wrong and whether regulators did enough to oversee the lender.Federal Reserve Vice Chair for Supervision Michael S. Barr appears before the Senate Banking, Housing and Urban Affairs Committee in Washington, D.C., on March 28, 2023.
The government bonds it was buying with depositors' money tumbled in value as interest rates rose, but the bank seemed unconcerned by that. Barr stressed that federal regulators had repeatedly warned the bank's managers about the risks it was facing, at least as far back as October 2021. The bank was served with formal notices documenting"matters requiring attention" and"matters requiring immediate attention."
That led some senators to call out colleagues who pushed for lighter rules, only to turn around and blame a lack of regulatory muscle for the bank's failure. When big depositors got wind of the problems at Silicon Valley Bank, they raced to pull their money out, withdrawing $42 billion in a single day.The bank scrambled to borrow more money overnight, but it couldn't keep up. By the following morning, depositors had signaled plans to withdraw another $100 billion — more than the bank could get its hands on, according to Barr.
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