March 28, 2023

At Hearing, Warren Secures Key Federal Regulators’ Commitments to Strengthen Banking Rules

Fed Vice Chair for Supervision, FDIC Chair, Undersecretary for Domestic Finance Agree with Warren’s Call for Stricter Regulations after Bank Collapses

Warren Announces Upcoming Bipartisan Legislation to Hold Bank Executives Accountable

Video of Hearing (YouTube)

Washington, D.C. – At a hearing of the Senate Banking, Housing, and Urban Affairs Committee, U.S. Senator Elizabeth Warren secured key federal regulators’ commitments to strengthen banking rules following the collapse of Silicon Valley Bank (SVB) and Signature Bank (Signature). Senator Warren announced that she will soon introduce bipartisan legislation to hold bank executives at SVB and Signature accountable for exploding their banks. 

In response to Senator Warren’s questions, Michael Barr, Vice Chairman For Supervision of the Federal Reserve (Fed), Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC), and Nellie Liang, Under Secretary of the Treasury for Domestic Finance, agreed with Senator Warren and President Biden’s calls to strengthen banking regulation. 

Senator Warren also secured Vice Chair Barr’s commitment to exercise the Fed’s authority to apply stronger prudential standards on banks with assets of least $100 billion and Chairman Gruenberg’s commitment to review rollbacks of the FDIC’s rules that his predecessor initiated and strengthen rules and supervision for banks with more than $100 billion in assets. 

Transcript: Recent Bank Failures and the Federal Regulatory Response
U.S. Senate Committee on Banking, Housing, and Urban Affairs 
Tuesday, March 28, 2023

Senator Elizabeth Warren: Thank you, Mr. Chairman. So we just experienced the second and third largest bank failures in American history. Executives at SVB and Signature took wild risks and must be held accountable for exploding their banks. And I'll soon introduce a bipartisan bill to do exactly that. 

But let's be clear, these collapses also represent a massive failure in supervision over our nation's banks. So coming out of the 2008 crisis, Congress put tough banking rules in place. Now, big banks hated them, and their CEOs lobbied hard to weaken those rules. 

Ultimately, Congress signed off and then it got bad, really bad. Regulators burned down dozens of safeguards that were meant to stop banks from making risky bets. Now, the three of you here today represent the U.S. Treasury and two of our top banking regulators. I'd like to know if you believe that we need to strengthen our banking rules going forward to ensure the safety of our financial system. 

Vice Chair Barr, let me start with you. Do you believe we should strengthen our financial rules going forward? 

Michael Barr, Vice Chairman For Supervision, Board of Governors of the Federal Reserve System: Yes, I do senator.

Senator Warren: Thank you. President Biden agrees with you as well. Two weeks ago, he stated that we must, quote, strengthen the rules for banks to make it less likely that this kind of bank failure would happen again. 

Chairman Gruenberg, what about you? Do you agree with President Biden that we need to strengthen our banking rules? 

Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation: I do agree, senator. 

Senator Warren: Good. And now, Undersecretary Liang, do you agree with the President on this? 

Nellie Liang, Undersecretary For Domestic Finance, U.S. Department of the Treasury: Senator, I agree that we do need to prevent these types of bank failures. 

Senator Warren: Well, I'm asking you, of course, we need to prevent them, but that's not by simply wishing it. It's by stronger regulation. Is that right? 

Undersecretary Liang: I agree, senator. 

Senator Warren: Okay, good. Now, we need better laws here in Congress. But let's also talk about how we can strengthen the rules today, even before Congress acts. 

Under current law, the Federal Reserve has the discretion to apply stronger prudential standards on banks with assets between $100 billion and $250 billion, exactly the size of Silicon Valley Bank. That authority is not being used right now. 

Vice Chair Barr, will you use your authority to strengthen rules for the largest banks in this country? As you use your authority to strengthen the rules for the largest banks in this country, will you be reaching banks with assets of at least $100 billion?

Vice Chair Barr: Senator, we of course would need to go through a notice and comment rulemaking–

Senator Warren: I understand 

Vice Chair Barr: –in this process, but I anticipate the need to strengthen capital and liquidity standards for firms over $100 billion.

Senator Warren: Okay, so this is the area we're looking at. We're going to push down further in terms of the greater scrutiny. 

Chairman Gruenberg, let me turn to you. Once the Fed began torching rule after rule in 2018 for big banks, the FDIC under your predecessor joined in on the fun and also started weakening FDIC rules across the board, capital and liquidity requirements, stress tests, you name it. In fact, your predecessor explicitly told these banks that if FDIC bank examiners were asking too many questions that they should “let us know.” Now there's a banking regulator who makes it clear that she is there to serve the big banks instead of the American public. 

Chairman Gruenberg, will you commit to using your authority to undo the rollbacks that your predecessor initiated and to strengthen the rules and supervision for banks with greater than $100 billion in assets?

Chairman Gruenberg: Senator, as I think you know, I was a member of the board at that time, and voted against those measures. And I certainly think it's appropriate for us to go back and review those actions in light of the recent episode, and consider what changes should be made. 

Senator Warren: I have to say, review sounds a little wishy here. You didn't think they were good rules to begin with.

Chairman Gruenberg: My views haven't changed, Senator. 

Senator Warren: All right. So you still think they were a bad idea?

Chairman Gruenberg:  I do. 

Senator Warren: Got it. You know, each of you at this table has authority that you could exercise right now to strengthen rules for big banks and to ensure that our banking system and our economy are safer. I urge you to use that authority and I urge my colleagues here in Congress to do our part to protect American families and small businesses from yet another banking crisis. Thank you.