Massachusetts Senator Elizabeth Warren on Thursday sent a scathing letter to Federal Reserve Chair Jerome Powell, criticizing the “astonishing list of failures” that contributed to the failure of Silicon Valley Bank and Signature Bank within the past week.
“The banks’ executives – who took too many risks, and failed to protect their customers – are the primary agents responsible for their failure,” Warren wrote. “But the greed and incompetence of these officials was allowed to happen under your watch.”
“It was allowed to happen because of Congress and President Trump’s weakening of the Dodd-Frank Wall Street Reform and Dodd-Frank Act that you supported,” Warren wrote. “It was allowed to happen because of regulatory rollbacks that you initiated. And it was allowed to happen because of supervisory failures by officials that worked for you. This is an astonishing list of failures and you owe the public an explanation for your actions.”
Thursday’s letter comes days after after Warren sent another blistering letter to the former president and CEO of Silicon Valley Bank, in which she wrote that he has nobody to blame for the bank’s failure “but yourself and your fellow executives.”
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Also on Thursday, Warren was among the lawmakers who questioned Treasury Secretary Janet Yellen during a Senate hearing; the Massachusetts Democrat criticized federal regulators and Congress for the 2018 rollback of Wall Street regulations that she said set the stage for the two banks to fail.
“We shouldn’t have had to be here in the first place,” Warren said during the Senate Finance Committee’s hearing. “These bank failures were the direct result of policymakers’ decisions over the last five years, beginning with a 2018 law signed by President Trump — with the support of both parties — to weaken the regulations that had been put in place after the 2008 financial crisis to ensure that big banks never again crashed our economy.”
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Warren, a leading critic of the banking industry, asked Yellen if she agreed with President Biden’s Monday comments that Congress and regulators should “strengthen the roles for banks to make it less likely that this kind of bank failure will happen again.”
“I think we certainly need to analyze carefully what happened that triggered these bank failures and reexamine our rules and supervision and make sure they are appropriate to address the risk that banks face,” Yellen replied.
Warren continued her criticism of Powell during the Senate hearing.
“Over the last few days we’ve heard a lot of Republicans say that this collapse wasn’t their fault, it was the banking regulators who were asleep at the wheel. And believe me, I have questions for a lot of the banking regulators. But Congress handed Chair Powell the flamethrower that he aimed at the banking rules,” Warren said.
Yellen’s appearance marked the first time a Biden administration official faced lawmakers after regulators stepped in to protect money at the two failed banks. Federal regulatory agencies guaranteed all deposits at the banks and created a program that effectively shields other banks from a run on deposits.
In her remarks, she said the country’s banking system “remains sound” and Americans “can feel confident” about their deposits.
The collapse last week of Silicon Valley Bank was the second-biggest bank failure in US history after the demise of Washington Mutual in 2008.
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'Congress handed Chair Powell the flamethrower that he aimed at the banking rules.'
— NowThis (@nowthisnews) March 16, 2023
Sen. Elizabeth Warren said a 2018 law signed by then-Pres. Donald Trump that loosened banking regulations paved the way for the failures of Silicon Valley Bank and Signature Bank — here’s how. pic.twitter.com/1d7mMikqmY
Amanda Kaufman can be reached at amanda.kaufman@globe.com. Follow her @amandakauf1.