McHenry: ‘All options should be considered’ to allow big banks to buy troubled smaller ones

Washington – Representative Patrick McHenry, chairman of the House Financial Services Committee, said Sunday that he believes “every option should be considered” to prevent a further crisis in the banking sector after sharp collapses of two banks this monthincluding allowing a large, too-big-to-fail institution to buy a smaller, troubled one.

In an interview with “Face the Nation,” McHenry said Congress should look into the circumstances that led to the shutdown Silicon Valley Bank March 10 and Signature Bank of New York in two days as well The Biden administration’s responseincluding whether there was an opportunity for a larger bank to step in and save the two failing institutions.

The North Carolina Republican said “what I need to investigate in Congress is the who, what, when, where, why and how of the bank failures and the decision” by the Biden administration over the weekend. deploy emergency measures to strengthen the banking system and support deposits in these banks.

“We’ve seen a response from the private sector to help support the bank,” he said. “Was that a viable option last weekend? Was there an ideological lens that prevented them from taking over these institutions and making it less turbulent for America?”

McHenry said that while lawmakers did not know whether the Biden administration had a viable buyer for Silicon Valley Bank over the weekend, Congress received comments from bankers who said they were not allowed to bid for the failed lender.

Representative Patrick McHenry on “Face the Nation” March 19, 2023

CBS News

“I think we know we’ve had a very difficult week for the American banking business and we’ve lost confidence,” he said. “And I think that raises questions about what happened last weekend.”

When asked whether a systemically large bank should be able to buy a troubled bank like First Republicregional lender hit by the collapse of Silicon Valley Bank, McHenry said “all options should be on the table.”

The rapid collapse of a Silicon Valley bank has renewed scrutiny from federal banking regulators and sparked a debate on Capitol Hill over whether Congress should tighten rules on mid-sized banks. Senator Elizabeth Warren, Democrat of Massachusetts, said “Face the nation” on Sunday that she favors a plan to lift the FDIC’s insurance limit above $250,000, although McHenry said he has not had “one conversation” with the White House or the Biden administration about changing the deposit insurance level .

“What I will do legislatively and as an oversight is to determine whether we need to address the FDIC deposit level issue,” he said. “We did it after the last financial crisis, raising between $100,000 and $250,000.”

But McHenry said “all options are on the table” for responding to the banking crisis.

“If we do that, we have to understand their trade-offs,” he said. “It’s not a fair play with allowing a larger set of insurance coverage. This comes at a significant cost to the financial system, and especially to community banks. We need to look at it very carefully.”

McHenry has already scheduled hearings of his Financial Services Committee with the head of the FDIC and the Federal Reserve’s vice chairman for supervision. But he did not say whether he planned to call Mary Daley, the head of the San Francisco Fed, to answer questions from Congress.

“We need to understand the decisions that were made last weekend, from Thursday to Sunday evening, about whether there is a viable solution for the private sector. We also need to understand the root causes of the failure of these banks, and we’re going to get there,” he said. “The San Francisco Fed issue is a supervisory issue. We need to look at whether it’s a supervisory problem, a regulatory problem, a bank mismanagement problem, maybe all three, frankly.”

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