On Tuesday’s edition of Bloomberg’s “Sound On” podcast, Rep. Brad Sherman (D-CA) stated that, despite assurances from President Joe Biden and the administration that the banking system is sound, “We don’t know” that because we haven’t assessed the risk of interest rate hikes, and “It’s as if the banks and the regulators have deliberately blinded themselves to that risk.”
Co-host Kailey Leinz asked, [relevant exchange begins around 47:30] “Well, as we talk about the interest rate risk they’re facing, that’s not something that goes away in the immediate near term, and yet, what we consistently hear from the regulators themselves, from the Treasury Department, from the President himself, others in the administration is that the banking system is sound and resilient? Is it not as sound, as resilient as they are trying to present, Congressman? What is your true read on the situation?”
Sherman responded, “Well, as part of the government, I’m supposed to go on radio and tell you that all the banks are sound.”
After being pressed for his honest assessment, Sherman answered, “We don’t know until we get interest rate risk analysis, both on marketable securities held for sale, marketable securities held — designed to be held for maturity, and on portfolios. It’s as if the banks and the regulators have deliberately blinded themselves to that risk. And it’s particularly absurd for the Fed to blind itself to the possibility that interest rates would go up, because they’re in charge of pushing the interest rates up.”
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