Sen. Elizabeth Warren (D-Massachusetts) is intensifying her scrutiny of federal financial regulators in the wake of the second- and third-largest bank failures in U.S. history, calling for an independent investigation into agencies that she says contributed to the collapses and saying that Federal Reserve Chair Jerome Powell especially deserves blame.
On Saturday, Warren called on the inspectors general of the Department of the Treasury, the Federal Deposit Insurance Corporation (FDIC) and the Fed to conduct a “thorough, independent investigation” into the regulatory causes behind the collapses of Silicon Valley Bank and Signature Bank. She says that, while the bank executives’ risky decision-making makes them culpable for their failures, they were only allowed to make those decisions in the first place because of lax regulatory oversight.
“Congress and President Trump weakened the Dodd-Frank Wall Street Reform and Consumer Protection Act and allowed banks like SVB and Signature to evade key rules and regulations,” Warren wrote in letters to the officials. “The Federal Reserve under Chair Powell initiated key regulatory rollbacks. And the banks’ supervisors — particularly the Federal Reserve Bank of San Francisco, which oversaw SVB — missed or ignored key signals about their impending failure.”
“These regulatory rollbacks created an environment in which failure was inevitable,” she continued. She says that an investigation is crucial for Congress to understand the weak areas to target in legislation to prevent future collapses, and urged the agencies to ensure that Powell does not interfere with the effort.
In an interview with MSNBC about the bank collapses on Sunday, Warren dug into Powell, saying that he “has failed” at his job as Fed chair.
“He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed at both,” Warren said.
In response to a question on whether or not she would recommend that President Joe Biden replace Powell — originally a Donald Trump nominee — she said, “look, I don’t think he should be chairman of the Federal Reserve. I have said it as publicly as I know how to say it.” She further said on CBS on Sunday that Powell “took a flamethrower” to bank regulations when conservatives and Trump rolled back Dodd-Frank bank regulations in 2018.
As the lawmaker pointed out in her letter to officials, Powell doesn’t just bear responsibility for the bank failures — he has also personally intervened in preventing the public from knowing about the regulatory shortfalls.
As New York Times reporters uncovered on Friday, as federal officials prepared an announcement that it would be bailing out depositors at Silicon Valley Bank and Signature Bank last week, Powell blocked the inclusion of a phrase mentioning the regulatory failures in the statement by the Fed, Treasury and FDIC.
According to the report, Powell blocked its inclusion because he wanted the focus to be on the efforts to prevent widespread fallout from the failures — though progressive and Democratic lawmakers like Warren and Sen. Bernie Sanders (I-Vermont) have argued that the real way to protect bank customers and prevent more collapses is to undo some of the deregulatory moves that Powell and conservatives have pushed through in recent years.
Progressive groups reacted with horror to the news of Powell’s move, echoing Warren’s message that Biden should not have renominated Powell.
“Jay Powell is an abomination, and everyone involved in Biden’s decision to renominate him must apologize,” wrote Revolving Door Project director Jeff Hauser on Twitter.
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