The White House is getting set to call for new federal banking regulations for midsized banks, The Washington Post reported Wednesday.
The call comes in the wake of the collapse of Silicon Valley Bank (SVB) earlier this month, the second-largest banking collapse in U.S. history.
On Monday, First Citizens Bank announced an agreement with the Federal Deposit Insurance Corporation ( (FDIC) for it to purchase “substantially all loans and certain other assets” of SVB.
According to the Post’s sources, the Biden Administration will ask Congress to undo a banking deregulation law that passed along bipartisan lines five years ago.
In the meantime, Congress continues to press for answers about how the financial industry became so vulnerable that both SVB, which serviced Silicon Valley’s tech industry, and New York City’s Signature Bank, which heavily serviced the cryptocurrency industry, collapsed within days of each other.
On Wednesday, officials from the FDIC, the Treasury Department and the Federal Reserve testified before the House Financial Services Committee. Lawmakers grilled the federal regulators on whether they knew about a run on SVB deposits before its March 10 collapse.
“I think that anytime you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed,” said Michael Barr, the Fed’s vice chair for supervision who is running an internal investigation. “We’re looking at all of that.”
Treasury Secretary Janet Yellen, meanwhile, told the Senate Finance Committee on Thursday that the U.S. banking system “remains sound.”
Formerly the Chair of the Federal Reserve, Yellen has described the Fed’s raising interest rates to combat inflation as the core source of SVB’s problems. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.
That didn’t stop the Fed–under current Chair Jerome Powell–from raising rates another quarter-point last Wednesday, though it pulled back slightly from previous vows to continue raising rates in the near future.
The precise details of the Biden Administration’s new banking recommendations are not clear. However, the White House will reportedly push to reestablish rules for banks with between $100 billion and $250 billion that were deregulated by Congress and the Fed during the Trump Administration.
Other measures Biden aides have discussed reportedly include requiring that the banks have a larger share of safe assets relative to their riskier loans; requiring they have greater stores of cash immediately available; and mandating they formulate plans for an orderly dissolution in the event of a crisis.
However, the Post’s sources said the banking discussions were still in flux and could change before the White House’s plans are finalized.
