-9999

Floor Speech

BREAK IN TRANSCRIPT

Mr. MORAN. Mr. President, earlier this year, the public confidence in the banking system was shaken by a series of significant bank failures. To put it simply, these banks failed to account for interest rate increases while leaning on a deposit base that was almost entirely uninsured. That is a textbook case of mismanagement.

It is critical that faith be restored in our Nation's banks and their regulators. But before policymakers clamor to write stricter banking regulations, an independent review board should be appointed to thoroughly probe the failure of Silicon Valley Bank and the response of the Federal Reserve Bank.

Many questions still remain unanswered. Silicon Valley Bank was quickly deemed systemically important because of its size, but the ensuing failure of a larger bank was not. The sale was dragged out for weeks out of fear that certain banks would grow too large, only for the largest bank in the country to turn around and purchase the next bank failure.

In my opinion, all parties involved had a role in this failure: bank executives, examiners, and regulators. The bank failed to both accurately leverage their position and react to rising interest rates. Examiners failed to require changes in either the bank's policy or subsequent actions. Regulators failed by arbitrarily guaranteeing all funds against loss, creating an unlimited market insecurity by forcing taxpayers and customers to now question the safety of their deposits. The administration failed by furthering a culture of government intervention that props up certain too-big-to-fail institutions.

Meaningful oversight requires objectivity and must hold all parties accountable without having a predetermined regulatory agenda in mind. To restore public confidence, the next step, in my view, would be to hire an outside investigative group to conduct a review of the Federal Reserve Bank's response. Conflicts of interest inherently arise when a singular member of the Board prepares a self-investigation.

This comprehensive review must be done by a party uninvolved in the failure of Silicon Valley Bank and/or uninvolved in the Federal response. This would better ensure that the outcome of this investigation would be impartial, helping put to bed doubts that the Fed's review only served as a stamp of approval on the Fed's policies.

The Fed's own internal review found significant negligence by both management and regulators. The public needs insight into the reasoning and conversations of regulators, the White House, and bank management involved in the response.

Silicon Valley Bank and the banks that subsequently failed were specialized to do business with a unique financial sector. Any reform regulators push now must be narrowly tailored to those circumstances to avoid collateral damage to small and midsized banks that consistently operate responsibly. Stricter capital requirements will push lending out of the regulated banking sector and into the nonbanks and money market funds, none of which are subject to the regulations of the Fed for banks, as the Fed regulates banks.

The banking turmoil was a result of a rapidly changing interest rate environment, the speed at which money can move, and the limitations of banks to adjust as quickly as the market can. Understanding the context and reason behind the response is absolutely necessary for ensuring future bank failures have a smooth and fair resolution with a minimal impact upon American taxpayers.

An independent review of the Silicon Valley Bank collapse is necessary to get a nonpartisan, less biased assessment that gives Americans confidence in our banking system and policymakers better ability to ensure our financial system remains the strongest in the world.

BREAK IN TRANSCRIPT

Source