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The Week Ahead: Senate to Probe Recent Downfalls in the Nation’s Banking System

On Tuesday, Tuesday, March 28 at 9:00 a.m. Central, the U.S. Senate Banking Committee will be hosting a hearing titled, “Recent Bank Failures and the Federal Regulatory Response.”

The invited panel of witnesses include The Honorable Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC); The Honorable Michael Barr, Vice Chairman for Supervision, Board of Governors of the Federal Reserve System; and The Honorable Nellie Liang, Undersecretary for Domestic Finance, U.S. Department of the Treasury. The panel will examine the state of the nation’s recent bank failures.

Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation on March 10, 2023, and the FDIC was appointed receiver. As of December 31, 2022, Silicon Valley Bank had a reported approximate $209 billion in total assets, and nearly $175.4 billion in total deposits. The FDIC has since named named former Fannie Mae head Tim Mayopoulos as CEO of Silicon Valley Bank, a subsidiary of the recently shuttered SVB Financial Group.

Just last week, SVB Financial Group announced that it has filed a voluntary petition for a court-supervised reorganization under Chapter 11 in the United States Bankruptcy Court for the Southern District of New York to preserve value. The Company believes it has approximately $2.2 billion of liquidity. In addition to cash and its interests in SVB Capital and SVB Securities, SVB Financial Group has other valuable investment securities accounts and other assets for which it is also exploring strategic alternatives.

New York Community Bank (NYCB) recently announced that its bank subsidiary, Flagstar Bank, acquired certain assets and assumed certain liabilities of Signature Bridge Bank from the FDIC. All regulatory approvals, including approval from the Office of the Comptroller of the Currency (OCC), have been obtained, and the transaction has closed.

Signature Bank was closed on March 12, 2023, by the New York State Department of Financial Services, which appointed the FDIC as receiver. After its appointment as receiver, the FDIC filed an application with the OCC to establish Signature Bridge Bank N.A., which was approved by the OCC later that day. The FDIC then transferred substantially all of the assets and liabilities of Signature Bank to Signature Bridge Bank N.A., operated by the FDIC, as it marketed such assets and deposits to potential bidders.

Among those presenting testimony will be Gruenberg, who was sworn in as Chairman of the FDIC Board of Directors on January 5, 2023. He has been a member of the FDIC Board since August 2005, and previously served as Vice Chairman from August 2005 to July 2011, and as Chairman from November 2012 to mid-2018. Gruenberg has also served as Acting Chairman on a number of occasions.

Gruenberg joined the FDIC Board after broad congressional experience in the financial services and regulatory areas. He served as Senior Counsel to Senator Paul S. Sarbanes (D-MD) on the staff of the Senate Committee on Banking, Housing, and Urban Affairs from 1993 to 2005. He also served as Staff Director of the Banking Committee's Subcommittee on International Finance and Monetary Policy from 1987 to 1992.

Gruenberg served as Chairman of the Executive Council and President of the International Association of Deposit Insurers (IADI) from November 2007 to November 2012. In addition, Gruenberg served as Chairman of the Federal Financial Institutions Examination Council (FFIEC) from April 2017 to June 2018.

Joining Gruenberg on the witness stand will be Barr, who took office as the Vice Chair for Supervision of the Board of Governors of the Federal Reserve System on July 19, 2022, for a four-year term. He also serves as a member of the Board of Governors for an unexpired term ending January 31, 2032.

Prior to his appointment to the Board, Barr was the Joan and Sanford Weill Dean of the Gerald R. Ford School of Public Policy, the Frank Murphy Collegiate Professor of Public Policy, the Roy F. and Jean Humphrey Proffitt Professor of Law at the University of Michigan Law School, and the founder and faculty director of the University of Michigan's Center on Finance, Law & Policy. At the University of Michigan Law School, Barr taught financial regulation and international finance and co-founded the International Transactions Clinic and the Detroit Neighborhood Entrepreneurs Project.

Barr served as the U.S. Department of the Treasury's Assistant Secretary for Financial Institutions from 2009-2010. Under President Bill Clinton, he served as the Treasury Secretary's special assistant, as deputy assistant secretary of the Treasury, as special adviser to the President, and as a special adviser and counselor on the policy planning staff at the U.S. Department of State.

Also slated to provide testimony is Liang, who was confirmed as the Under Secretary for Domestic Finance at the U.S. Treasury Department on July 15, 2021. Prior to serving at Treasury, Liang was a Senior Fellow in Economic Studies at the Brookings Institution. She also was a Visiting Scholar at the International Monetary Fund’s Monetary and Capital Markets Department, Lecturer at the Yale School of Management, and a member of the Congressional Budget Office’s Panel of Economic Advisors.

Over three decades at the Board of Governors of the Federal Reserve System, Liang held a range of positions, including as the first Director of the Division of Financial Stability from 2010 to 2017. In that position, she oversaw the development of financial stability policies related to risks in financial firms and financial markets, and interactions of financial policies with monetary policy. Her recent research has focused on the financial system and macroeconomic growth.

Click here for more information or to register for the Senate Banking Committee Hearing “Recent Bank Failures and the Federal Regulatory Response.”

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About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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