Sen. Mike Rounds, R-S.D., told Newsmax on Monday that the Senate does not look at individual bank statements, and would be reliant on the bank regulators to alert them to a problem, as in the case of the sudden collapse of Silicon Valley Bank (SVB) in California.
"We oversee the regulators, and when we asked them questions about whether or not they need additional tools, whether or not the tools they have are working, we get the response back that, 'Yes, the capital is in place. We are as well capitalized as we've been in a long, long time. The banking system is safe,'" Rounds, a member of the Senate Banking Committee, said during an appearance on Newsmax's "The Record with Greta Van Susteren."
"But you assume that those tools that they have available are being utilized," he continued. "The Federal Reserve is telling us, 'We're going to go back through and we're going to look and make sure that our processes are in place.' With regard to the inflation, when you take a look at each single bank, they have, as part of their responsibility, to make good investments on the deposits that are there in front of them, the capital that they have. Now, every single quarter these banks make a report to their regulator and on that form, they report the type of liquidity that they have."
"If those reports are coming in, and the regulators aren't doing something about it, then that becomes a challenge. On the other hand, if those reports are coming in, and they appear to be OK, or if the regulators say, 'You know what, everybody's going to have this problem because the inflationary trend is something we're simply going to have to deal with,' those are two different problems."
When asked if the Trump administration caused or contributed to the problem at SVB by rolling back banking regulations, Rounds said, "I don't believe so."
"This is basically a case where it is a liquidity problem, not necessarily a capital problem," he said. "These banks, so far, have invested in long-term securities with low interest rates when we had one heck of a shot of inflation since the Biden administration began. And with that increase in inflation, those bonds started to devalue because they just simply weren't worth as much because they weren't invested at the higher rates that are available today."
Rounds said furthermore that the banks make a liquidity report every quarter and "there's been plenty of opportunity" for the regulators to step in "if they didn't feel comfortable."
"We don't know exactly what the regulators had recommended — whether they simply ignored it, whether they thought this inflation was going to be transitory or not," he said. "Clearly it is not."
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