Congress reacts to bank failure

WASHINGTON — Lawmakers who sit on top banking committees applauded the federal takeover of the bank First Republic Bank On Monday, the sale of its assets was suspended to c. B. Morgan Chase As a successful collaboration between the public and private sectors to protect the American financial system.

“This immediate, cost-effective sale of the bank protects depositors, limits contagion, and ensures that our country’s taxpayers are at no cost,” said Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee.

“I appreciate the quick action of regulators to facilitate the sale of the bank’s assets while minimizing the risk to taxpayers,” said the committee’s Republican chair, Rep. Patrick McHenry, R-North Carolina.

The collapse of the institution, which followed the failures of Silicon Valley Bank and Signature Bank in March, has sparked a new debate on Capitol Hill about how best to deal with threats to the financial system.

Republican lawmakers have repeatedly warned against passing new legislation in response to the banks’ failure, and refused to push for tighter regulation again on Monday.

Meanwhile, Democrats have focused on the 2017 banking deregulation bill that passed with bipartisan support at the time, making today’s repeal efforts unlikely to succeed.

More broadly, with divided control of the House and Senate and negotiations over the debt ceiling set to dominate the next several months, there is little hope in Washington that any serious banking reforms will emerge from Congress this year.

However, the desire for banking reform exists outside Congress.

The Federal Deposit Insurance Corporation, which has backed tens of billions of dollars in uninsured deposits in failing banks, issued New report Monday outlines different options for deposit insurance reform. The report concluded that Congress should allow higher limits or unlimited insurance for business accounts.

Republicans have indicated so far that they strongly prefer private sector solutions to expanded government support.

On the Senate side, the ranking member of the Chamber Banking Committee, Senator Tim Scott, R-Sr., said he was “glad” that the FDIC has secured a private market solution for First Republic. I look forward to learning more about the bidding process and bringing transparency to the American people.”

His statement contrasts with the reaction of the chairman of the Senate Banking Committee, Democratic Senator Sherrod Brown of Ohio. He did not respond directly to the federal intervention, choosing instead to direct his wrath on the failing bank.

“First Republic Bank’s dangerous behavior, unique business model and management failure have led to significant problems and it is clear we need stronger barriers in place,” Brown said in a statement. “We must make the big banks more resilient to failure in order to protect financial stability and ensure competition in the long term.”

Like Brown, Waters has called for a more forceful congressional response to the failure of three major regional banks since the beginning of March: first SVB, then Signature Bank, and most recently First Republic.

The government’s reports released Friday reviewing federal responses to the SVB and sign-off “underscore the need for Congress and regulators to strengthen regulation and oversight of regional banks,” and to “recover compensation to hold bank executives accountable for their actions,” Waters said.

Waters also said the House Financial Services Committee should invite the CEO of First Republic to testify. An earlier invitation from the Senate Banking Committee to the CEOs of SVB Bank and Signature Bank was denied in March, according to follow-up letters the committee sent to the CEOs.

However, it was not clear Monday whether First Republic’s slow collapse over several weeks, which culminated in the sale announcement, would be enough to revive interest on Capitol Hill in legislation to further regulate banks or impose tougher penalties on bank executives. . in failing banks.

after a wave of new bills In the weeks since the SVB collapse, Congress has yet to take any concrete action in response to the bank failures, beyond holding hearings with regulators.

Bipartisan bill for the Senate Submitted in late March It would give federal regulators far more power to recover compensation for failed bank executives than they have under current law.

The bill has been referred to the Banking Commission, which has not yet taken any specific legislation in response to the bank’s failures.

The Clawback Act for failed bank executives was just one of many several Pieces of legislation She is backed by Senator Elizabeth Warren, a longtime skeptic of big banks.

In a statement released Monday, the Massachusetts Democrat said the First Republic’s failure “shows how deregulation has made the too-big-to-fail problem even worse.”

She added, “A poorly supervised bank has been snapped up by a bigger bank – and eventually the taxpayers will be on the hook. Congress needs to make major reforms to fix a broken banking system.”