Rep. French Hill, R-Ark., told Newsmax on Tuesday that Congress needs to "reassess the supervision of these banks" in the wake of the sudden collapse of Silicon Valley Bank (SVB) in California and Signature Bank in New York.
On Sunday, U.S. authorities took emergency action to shore up confidence in the banking system after the failure of SVB threatened to spark a widespread financial crisis.
Regulators said customers of both failed banks would be able to access all their deposits beginning Monday and set up a new vehicle to provide banks with emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.
"They thought that [emergency action] was in the best interest of the country," Hill said during an appearance on Newsmax's "National Report." "But we definitely need to reassess the supervision of these banks that led to the collapse, and we ought to take another look at the deposit insurance system and see if there are changes that we need to make there, as well."
Hill said he believes there were "multiple factors" that contributed to the collapse of SVB and was glad to see Fed Chair Jerome Powell announce a "thorough investigation of the supervisory process" that led to the bank's failure.
"First of all, we've had 10 years of easy money, and we have an avalanche of fiscal stimulus and spending by the Biden administration that made financial conditions very lax," he said. "And, in my view, the management team at Silicon Valley Bank made some catastrophic mistakes in the management of the bank. They had 90% of their deposits above the insurance limit of $250,000 per account, and they invested in long, fixed-income securities in a rising rate environment. That's an economic error of significant proportions."
"Where was the San Francisco Federal Reserve Bank?" he asked. "And where was the California State Bank regulator over the past 2 1/2 years, supervising and assessing Silicon Valley's management?"
The Natural State congressman said that Twitter also played a part in regulators' struggle to secure a buyer for both financial institutions.
"This weekend they tried to find a buyer for both of these banks," he said. "They were not successful in doing that, and that's because they both precipitously had an old-fashioned 1930s bank run promulgated by rumors on Twitter last Thursday and Friday."
"So they decided to use the Federal Reserve and the FDIC powers to, in the short run, guarantee those deposits to stabilize the situation on Monday, so it would not spread and because of the millions of employees that depend on Silicon Valley for payroll in the venture capital industry nationwide."
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