House Looks to ‘Get to Bottom’ of Banking Collapses

The U.S. House Financial Services Committee is set to begin investigating two high-profile banking failures.

Rep. Patrick McHenry, who chairs the committee, and Rep. Maxine Waters, its ranking member, announced Friday (March 17) that they’ll hold a hearing looking at the collapse of Silicon Valley Bank (SVB) and Signature Bank.

Witnesses at the hearing, scheduled for March 29, will include Martin Gruenberg, chair of board of directors at the Federal Deposit Insurance Corporation (FDIC), and Michael S. Barr, vice chair for supervisors at the Federal Reserve’s board of governors.

“The House Financial Services Committee is committed to getting to the bottom of the failures of Silicon Valley Bank and Signature Bank,” McHenry and Waters said in a news release. “This hearing will allow us to begin to understand why and how these banks failed.”

The release notes that the committee will hold other hearings “as appropriate.”

SVB was shut down and taken over by regulators March 10 following a run on deposits. It was one of the largest banking failures in U.S. history and an event that continues to shake the financial world. Two days after SVB folded, the run spread to Signature Bank, which was also shut down by regulators.

“As this past week dawned, we’ve seen the lingering aftershocks, where the FDIC has made an example of making an exception of paying back uninsured depositors, and a fund has been set up to help banks make their depositors whole,” PYMNTS noted Saturday (March 18) in a review of the hectic week.

After the failure of SVB and Signature, regional banks continued to slip, with the week ending with another wave of worries about bank runs. On Thursday (March 16), 11 larger banks – including giants like JPMorgan and Wells Fargo — pumped $30 billion of liquidity into First Republic Bank.

The bank’s CEO has praised the move as a “vote of confidence” in First Republic and in the banking system at large. However, as PYMNTS wrote, there’s a Catch 22 at work.

“If injections of liquidity become commonplace in an effort to shore up confidence, the fact that banks are furiously backstopping one another may be a signal event that erodes confidence. Rinse, lather, repeat. The question becomes what the better alternative might be.”

As for Signature and SVB, the FDIC is reportedly open to negotiating sharing losses if that helps move along the sale of the two banks, the Financial Times reported Friday (March 17).

The regulator had previously ruled out sharing losses but has reportedly since changed its mind after an attempted auction of SVB drew just one bidder.