Sens. Thom Tillis (R-N.C.) and Jon Tester (D-Mont.) today urged President Biden to appoint an independent investigator to further probe the recent bank failures. “Though the regulatory agencies tasked with overseeing our financial institutions have released a series of internal reports examining causes, failures and corrective measures, we believe an independent examination that covers the full jurisdictional scope of these failures, led by nonpartisan experts, is critically important,” the senators said in a joint letter.
Tillis and Tester said that an independent review is necessary given that internal reviews by federal and state agencies concluded that supervisory actions and inactions played “a key role” in the failures. “Self-reflection, while appreciated, is insufficient to ensure stressors to our financial system of this magnitude are not repeated,” they said. “Oversight efforts will benefit from a comprehensive examination spanning both federal and state financial regulators, as well as elsewhere in the federal government where response efforts are taking place.” Their proposal is similar to one made by Federal Reserve Governor Michelle Bowman last week, who suggested the Fed have an independent third party conduct a review to supplement its own.
Both senators are members of the Senate Banking Committee, which held a hearing that same day with state and federal regulators on the failures. At the hearing, Fed Vice Chairman of Supervision Michael Barr said he expected the agency to propose both supervisory and regulatory changes as a result of its review of the Silicon Valley Bank’s failure. Tester countered that the review showed the failure wasn’t a result of regulatory failure. Rather, the agency failed to properly tailor regulation to match SVB’s risk, as permitted by a 2018 Senate bill, S. 2155, he said.
“Regulation needs to fit the risk,” Tester said. “I think when 2155 was put up, it was put up with the idea that if you had a risky portfolio—regardless of size—that the Fed and the other agencies had the ability to tailor whatever threat that those risky business dealings (merited).”
