Senator Elizabeth Warren wants 3 IGs to conduct independent bank probes

Elizabeth Warren, Bernie Sanders and Lisa McCormick

U.S. Senator Elizabeth Warren wants a thorough, independent investigation of the causes of the bank management, regulatory and supervisory problems that resulted in the failure of Silicon Valley Bank and Signature Bank but a progressive activist Lisa McCormick says everyone knows the fault rests on reckless Federal Reserve interest hikes and a political system that runs on legalized bribery.

U.S. Senator Elizabeth Warren wrote the Inspectors General at the Department of Treasury, the Federal Deposit Insurance Corporation (FDIC), and the Board of Governors of the Federal Reserve, urging them to immediately open a probe to find out what caused in the banks to collapse and deliver preliminary results to Congress and the public within 30 days.

“The bank’s executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures,” wrote Warren. “But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators.”

“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,” said Warren, echoing statements made by New Jersey bank reform advocate Lisa McCormick, who specifically blamed Rep. Josh Gottheimer and Trump for deregulation that caused the bank failures.

McCormick recently spoke out against Gottheimer, who took huge sums of campaign money from the financial industry and was the only New Jersey Democrat in Congress who voted to weaken regulations that could have prevented the institution’s collapse.

U.S. Senator Bernie Sanders has made strikingly similar remarks.

“Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed,” said Sanders, who argued that Washington politicians had disregarded all the lessons they should have learned from the 2008 Wall Street crash and the Enron scandal.

“Let us have the courage to stand up to Wall Street, repeal the disastrous 2018 bank deregulation law, break up too big to fail banks, and address the needs of working families, not the risky bets of vulture capitalists,” said Sanders, who paraphrased Dr. Martin Luther King, Jr. in that the US “cannot continue down the road of more socialism for the rich and rugged individualism for everyone else.”

“The Federal Reserve under Chair Powell initiated key regulatory rollbacks,” said Warren. “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.”

“Federal Reserve actions since 2018 have significantly weakened banking protection rules, making the economy and financial system more vulnerable to another crash,” said McCormick, who noted that the banking system is sitting on $620 billion in unrealized losses as consequence of eight interest rate hikes over the last year.

Last week, Warren called on Jerome Powell to recuse himself from an internal probe on Silicon Valley Bank’s collapse after it was revealed that the Federal Reserve chairman prevented Biden administration officials from identifying shortcomings in financial regulation that contributed to SVB’s collapse.

“It is also critical that your investigation be completely independent and free of influence from the bank executives or regulators that were responsible for action that led to these bank failures,” said Warren.

“I am particularly concerned that you avoid any interference from Fed Chair Jerome Powell, who bears direct responsibility for – and has a long record of failure involving – regulatory and supervisory matters involving these two banks,” wrote Warren. “I have already asked Chair Powell to recuse himself from the Fed’s internal investigation of this matter, but he has not yet responded to this request. ”

“This silence is troubling, as are reports that last week, as officials sought to develop a plan responding to SVB’s failure, Chair Powell muzzled regulators from any public mention of the regulatory failures that occurred under his watch,” wrote Warren. “If these reports are true, they would reveal outrageous and inappropriate interventions by Chair Powell.”

Warren called on the inspectors general to provide Congress and the public with a full and unredacted preliminary report on the findings of their investigation, including any recommendations, within 30 days.

“The central bank’s decision to increase interest rates brings the cost of borrowing money to the highest level in 15 years but it won’t ease inflation,” said McCormick, after the Federal Reserve Bank raised interest rates for the eighth time. “The central bank’s decision to increase interest rates and make credit more expensive did nothing to alleviate supply chain issues or corporate greed, the two biggest reasons Americans are confronted with excess cost increases.”

The Federal Reserve was the primary regulator of both Silicon Valley Bank and Signature Bank, whose back-to-back collapses sparked panic in financial markets and concerns about cascading impacts on the U.S. economy.

Powell, an ex-investment banker originally appointed by Trump, tried to cover up his own misconduct by eliminating the line on regulation from the statement because he wanted to focus on the actions being taken to shore up the financial system.

McCormick faulted Biden for nominating Powell to a second term as Federal Reserve chair, but she slammed Gottheimer for being the only New Jersey Democrat who voted for the Economic Growth, Regulatory Relief, and Consumer Protection Act, which removed Silicon Valley Bank from the stricter regulatory landscape for financial institutions in the United States established in the wake of the global financial crisis.

The greatest factor that led to mismanagement at Silicon Valley Bank and Signature Bank was changing the threshold from $50 billion to $250 billion under which banks are deemed too big to fail.

McCormick quoted presidential candidate Marianne Williamson, who recently said, “This is what happens when corporate greed takes precedence over responsibility to people and planet. So the system goes. And why we need to disrupt it.”

“The entire system is working against the people, whether the individual actors are Joe Biden and Jerome Powell, or Josh Gottheimer and Donald Trump,” said McCormick. “Marianne Williamson is saying we need to disrupt the system and all the evidence confirms that she is right about that.”

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