McHenry Questions FDIC’s Response to Banking Failures

A leading House Republican is questioning the federal government’s response to First Republic Bank’s collapse.

In a statement issued Monday (May 1), House Financial Services Committee Chairman Patrick McHenry said he appreciated the “quick work” of the Federal Deposit Insurance Corporation (FDIC) in selling off the bank’s assets to J.P. Morgan “while minimizing risk to taxpayers.”

“The question remains, why didn’t the FDIC do the same thing in March when SVB was placed into receivership,” McHenry added, referring to Silicon Valley Bank. “It’s critical that the [President Joe] Biden administration and its regulators not politicize these events.”

He added that the committee will “continue to use its authority” to investigate the recent banking failures, the largest in American history.

A spokesperson for the FDIC declined to comment when reached by PYMNTS.

First Republic was taken over by the FDIC Monday following weeks of teetering on the edge of collapse. The regulator had held an auction Sunday (April 30) seeking a buyer for the lender, ultimately settling on J.P. Morgan, the country’s largest bank.

Amid of the banking crisis that began in March with the back-to-back collapses of SVB and Signature Bank, First Republic found itself downgraded by ratings agencies due to its substantial level of uninsured deposits held by its wealthy customer base.

As was the case with several regional banks, many of those customers left First Republic for larger banks during the crisis, taking more than $100 billion in deposits with them during the first quarter of this year.

Word of this “unprecedented” level of withdrawals left First Republic on even more dangerous ground, as its stock — already down 96% since last year — saw its remaining value cut in half.

McHenry has criticized the administration’s politicization of the banking failures before, including in the wake of committee hearings on the SVB collapse.

Last week, the North Carolina Republican issued a response to a Federal Reserve report in which the central bank admitted its lack of oversight in the failure of SVB.

“Following Silicon Valley Bank’s failure, we must strengthen the Federal Reserve’s supervision and regulation based on what we have learned,” said Federal Reserve Vice Chair for Supervision Michael S. Barr.

“While there are areas identified by Vice Chair Barr on which we agree — including enhancing attention to liquidity issues, especially when a firm is rapidly growing — the bulk of the report appears to be a justification of Democrats’ long-held priorities,” McHenry said.