The Federal Reserve's bank supervisors warned SVB's management as early as the fall of 2021 of risks stemming from its unusual business model, a top Fed official said Tuesday, but its managers failed to take the steps necessary to fix the problems.
WASHINGTON, D.C -- The Federal Reserve's bank supervisors warned Silicon Valley Bank's management as early as the fall of 2021 of risks stemming from its unusual business model, a top Fed official said Tuesday, but its managers failed to take the steps necessary to fix the problems.
Late Sunday, the Federal Deposit Insurance Corp. said that resolving the two banks, including reimbursing depositors, would cost its insurance fund $20 billion, the largest such impact in its history. The FDIC plans to recoup those funds through a levy on all banks, which will likely be passed on to consumers.
"I hope to learn how the Federal Reserve could know about such risky practices for more than a year and failed to take definitive, corrective action," said Sen. Tim Scott, Republican from South Carolina."By all accounts, our regulators appear to have been asleep at the wheel." Barr said that depositors withdrew $42 billion — equal to about a quarter of the bank's assets — on the Thursday before the bank failed. On Friday morning, it faced an additional $100 billion in withdrawal requests.
Martin Gruenberg, chairman of the FDIC, and Nellie Liang, the Treasury undersecretary for domestic finance, also testified Tuesday. On Wednesday, all three will testify to a House committee.
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