Federal Reserve Chair Jerome H. Powell is expected to face a political storm over the U.S. central bank’s oversight of collapsed Silicon Valley Bank (SVB) during a hearing on Capitol Hill[1]
The Fed is expected to raise interest rates by a quarter of a percentage point on Wednesday, which will land amid the brewing political storm over SVB’s oversight.
The failure of California-based SVB warranted “a thorough, transparent, and swift review” of how the Fed supervised the nation’s 16th largest bank.
The Fed has said its review of SVB’s supervision will be finished by May 1 and released to the public.
SVB had a business model that made it unusually vulnerable to a wave of rapid withdrawals, which led to its collapse.
Congress is planning hearings next week on recent bank collapses, including SVB’s collapse.
Investors and experts in financial regulation have been racing to figure out what went wrong even before the conclusion of those inquiries.
If SVB’s demise is evidence of a blind spot in how banks are overseen, then weaknesses could be more broadly spread throughout the banking system.
The Federal Reserve has been criticized for its oversight of banks in recent years. In 2021, two of the Fed’s 12 regional bank presidents resigned as a result of trading scandals, and Powell launched an overhaul of the central bank’s ethics rules as criticism mounted.