New Report on Silicon Valley Bank Collapse Pins Blame on Fed Regulators
A new independent review of Silicon Valley Bank's 2023 collapse has concluded that Federal Reserve supervisory staff knew or should have known about the bank's severe vulnerabilities as early as March 2022, but failed to take prompt action to prevent the failure. The report, conducted by consulting firm Starling Advisory Group at the request of Fed Vice Chair Michelle Bowman, identifies the bank's mounting securities losses, high concentration of uninsured deposits, and lack of emergency borrowing readiness as key vulnerabilities. Bowman emphasized that the delayed regulatory response stemmed from a longstanding culture of risk aversion within the Federal Reserve and unclear decision-making authority rather than from looser regulations implemented in 2018. The preliminary findings contradict an earlier internal Fed review by Bowman's predecessor Michael Barr, which had blamed regulatory rollbacks for supervisory failures. The report's release has sparked considerable debate, with Democrats questioning the independence of the review given Starling's ties to Trump-appointed officials, while the Fed is moving forward with reforms to improve supervisory practices.
Key facts
- Federal Reserve supervisory staff knew or should have known about SVB vulnerabilities as early as March 2022
- The bank had 94 percent uninsured deposits and large unrealized losses on its securities portfolio
- Starling Advisory Group conducted the independent review, which contradicts the prior assessment by predecessor Michael Barr
- The report concluded regulatory rollbacks from 2018 were not responsible for supervisory delays
- Senator Elizabeth Warren called the report a partisan attempt using taxpayer funds to exonerate Trump administration officials
- Michelle Bowman, a Trump appointee, commissioned the review after stepping in as Fed Vice Chair for Supervision
How different outlets framed it
Left-leaning coverage: Democratic critics, led by Senator Elizabeth Warren, argue that the Starling report is a partisan attempt to rewrite history and deflect blame from Trump-era deregulation. They contend that the 2018 rollback of banking regulations significantly contributed to SVB's failure and point to Starling's connections to Trump officials as evidence the review lacks independence. Warren called it an attempt to pave the way for more dangerous deregulation.
Right-leaning coverage: The new report's conclusion that cultural risk aversion rather than deregulation caused regulatory failures aligns with Trump administration preferences for streamlined oversight. The absolution of Trump-appointed Randal Quarles from blame and the finding that 2018 regulatory changes did not cause the problem support arguments for regulatory flexibility without undermining financial stability.
Limits of this briefing
The full Starling Advisory report has not been publicly released; conclusions are based on Bowman's presentation of preliminary findings. There is substantial partisan disagreement about whether the report was conducted independently or designed to support deregulation, and the analysis lacks transparency that would allow independent verification of the underlying data and methodology.
Sources
- CNN: Report faults Fed staff for epic failure of Silicon Valley Bank Centre
- Axios: Rethinking Silicon Valley Bank's failure Centre
- Reuters (via Investing.com): Report finds 'culture of risk aversion' hindered oversight of SVB, Fed official says Centre
- The Hill: Fed missed warning signs before SVB failure: Review Centre
- CNBC: Fed staff should have known Silicon Valley Bank was vulnerable, new report finds Centre