Sen. Bill Hagerty (R-TN) said he found it “damning” that the CEO of Silicon Valley Bank was on the San Francisco Federal Reserve Board one day before the bank collapsed, speaking during a Senate Banking Committee hearing Tuesday.
Hagerty told regulators to evaluate the federal government’s response to the collapse of Silicon Valley Bank and other bank failures. He took issue with Silicon Valley Bank’s focus on diversity, equity, and inclusion (DEI), as well its lack of risk management. However, he said the worst part of Silicon Valley’s collapse was that the bank’s CEO was on the San Francisco Federal Reserve Board as the bank was collapsing.
The Tennessee senator said the bank was too focused on frivolous “left-wing policies” at the expense of its primary duties:
It’s pretty clear that Silicon Valley Bank was woefully mismanaged. Their management team, which didn’t have a chief risk officer for eight months last year, yet created and maintained a chief diversity, equity, and inclusion officer, allowed their bank to accumulate truly shocking levels of risk. While this was occurring, the San Francisco Fed was focused on researching left-wing policies that they had absolutely no expertise in, ignoring one of the most basic risks in banking, interest rate risks.
Perhaps most damning of all, until the day of their failure, SVB’s CEO sat on the board of the San Francisco Fed.
In response to Hagerty’s questioning, Michael Barr, the vice chair of the Federal Reserve, said that Silicon Valley Bank mismanaged its interest rate risk, its liquidity risk, and did not heed warnings from the San Francisco Fed.
Hagerty said that he hopes that Barr will dig into the “sense of urgency that was brought to bear on this … because they [the Fed] certainly were doing other things.”
Barr also said during the hearing that Silicon Valley Bank had its CAMELS supervisory rating, the rating for a bank’s overall condition, downgraded to three out of five.
“‘Normally we would not be describing these confidential matters, but given that the firm failed and triggered a systemic risk determination,’ he would discuss,” Barr remarked.
Former Treasury Secretary Larry Summers said in a recent interview that the Silicon Valley Bank CEO should not have been on the board of the San Francisco Fed: