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House lawmakers continue to question regulators on SVB accountability in second day of hearings

Yahoo Finance fiscal policy reporter Jennifer Schonberger discusses the second day of congressional hearings over the collapse of Silicon Valley Bank.

Video transcript

DAVE BRIGGS: But first, let's get you up to speed on day two of the bank hearings on Capitol Hill. Top banking regulators testifying today before the House Financial Services Committee over their department's role in the collapse of Silicon Valley Bank and the fallout from it. Yahoo Finance's Jen Schonberger has all the details. Hi there, Jen.

JENNIFER SCHONBERGER: Dave, once again, House lawmakers trying to get to the bottom of what happened and why Silicon Valley Bank failed. In five hours of questioning in a hearing that is ongoing, Republicans and Democrats on the House Financial Services Committee both agree the Federal Reserve should have done more to prevent Silicon Valley Bank from failing.

- Your Senate testimony, in which you basically said it was bank mismanagement for them to ignore the good advice your people gave them, it is also misregulation to let banks ignore that advice. You are not running a consulting operation. You are running a regulatory operation who can force banks to follow that advice.

JENNIFER SCHONBERGER: In a series of questions from committee chair Patrick McHenry, it became clear that regulators at the Federal Reserve, the Treasury, and FDIC became aware of the distress in SVB Thursday before it collapsed, but that there was difficulty evaluating collateral from the bank and pledging it to the Fed's discount window in time to get funding. FDIC chair Martin Grunberg said he understood that the bank would fail Friday morning or evening, but did not begin the auction process for SVB until Sunday afternoon.

- I've heard none of you three accept real responsibility for your role in this endeavor.

- And I think we need to take a good hard look inside at the Federal Reserve, at our supervision, at our regulation. I think we need to be humble about that, and I think we are going to be unflinching in our review.

JENNIFER SCHONBERGER: But both parties disagreed on what should be done to prevent it from happening again. Democrats argued a 2018 Trump era law that rolled back the strictest requirements for banks the size of SVB was to blame. When asked whether rules under that 2018 law should be rewritten, Barr said that he will take a look at that as part of his review. Barr said it doesn't have to be the same rules for all banks, but that stronger rules are needed for firms of SVB's size on capital and liquidity. Barr said, quote, "everything is on the table." Republicans said the Fed has all the powers it needs to hold banks accountable without changing capital requirements. Back to you.

DAVE BRIGGS: Indeed. Jen Schonberger, great job. Thanks so much.