In one of his last speeches before exiting his current role, FDIC Chairman Martin Gruenberg today said he was worried that “memories are short” when it comes to the factors that led to past banking crises. “We should not allow the current relative stability of the banking and financial systems to lull us into a false sense of complacency,” he said.
Gruenberg will step down as FDIC chairman on Jan. 19, which is a day before President-elect Trump is sworn into office. Speaking at the Brookings Institution, Gruenberg listed the factors that led to the three banking crises since the 1980s, including the turmoil caused by the collapse of Silicon Valley Bank in 2023. The chairman said he was struck by how many common threads the three shared.
“Interest rate and liquidity risk, reliance on uninsured deposits and wholesale funding, inadequate capital, leverage, rapid growth, poorly understood new financial products and companies, sheer size, inadequate risk management by the banks, and accommodating supervision and regulation have repeatedly forced the hand of the U.S. government to intervene and protect different types of creditors, and the firms themselves,” he said.
Gruenberg also said that he remains “particularly concerned” about the proliferation of nonbank financial institutions, “which I believe pose financial risks.”
“New technologies, new financial products and new kinds of financial companies are part and parcel of the evolution of the financial system that we have experienced before,” Gruenberg said. “But we should not kid ourselves into believing that they do not present risks that need to be carefully supervised and, if necessary, regulated.”
