Ohio Democratic Party Chairman Sherrod Brown (L) and Ranking Sen. Tim Scott (R-S.C.) arrive at a Senate Banking, Housing and Urban Affairs Committee hearing to discuss recent bank failures on April 27, 2023 event.
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WASHINGTON — Lawmaker chairing key banking committee praises federal government for taking over first republic bank Monday, and blocked the sale of its assets to JPMorgan As a successful public-private partnership to protect the U.S. financial system.
“This swift and cost-effective sale of the bank protects savers, limits contagion and ensures our nation’s taxpayers don’t lose any money,” said Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee. cost.”
“I thank regulators for their swift work to facilitate the sale of bank assets while minimizing risk to taxpayers,” said the committee’s Republican chairman, Rep. Patrick McHenry of North Carolina.
The institution’s collapse has sparked a new debate on Capitol Hill about how best to respond to threats to the financial system, following the collapse of Silicon Valley Bank and Signature Bank in March.
Republican lawmakers have repeatedly warned against passing new legislation to address bank failures, and on Monday they resisted another push for stricter regulation.
Meanwhile, Democrats are focused on the Bank Deregulation Act of 2017, which had bipartisan support at the time, so repealing it today is unlikely to succeed.
More broadly, with control of the House and Senate split and debt-ceiling negotiations set to dominate the coming months, Washington has little hope of passing any serious banking reforms in Congress this year.
Even so, there is still demand for banking reform outside Congress.
The FDIC, which backs tens of billions of dollars in uninsured deposits at failed banks, issued a new report Various options for deposit insurance reform were outlined on Monday. The report concluded that Congress should allow higher-limit or unlimited coverage for business accounts.
So far, Republicans have signaled their strong preference for private-sector solutions over expanded government support.
On the Senate side, Sen. Tim Scott (R-S.C.), the ranking member on the Chamber’s Banking Committee, said he was “pleased” that the FDIC “secured a private market solution for the First Republic. I look forward to Learn more about the bidding process and bring transparency to the American people.”
His statement contrasted sharply with the reaction of Sen. Sherrod Brown, D-Ohio, who chairs the Senate Banking Committee. Instead of responding directly to the federal government’s intervention, he chose to take his anger out on failing banks.
“First Republic’s risk-taking behavior, unique business model and management failures have led to significant problems, and it is clear that we need stronger protections,” Brown said in a statement. “We must make the largest banks more resilient to Fail so we can protect financial stability and ensure long-term competition.”
Like Brown, Waters called for a stronger congressional response to the failures of three major regional banks since early March: first SVB, then Signature Bank and most recently First Republic.
Friday’s government report, which examines the federal government’s response to SVB and Signature, “emphasizes the need for Congress and regulators to increase regulation and oversight of regional banks,” Waters said, and the need for “compensation callbacks for bank executives to responsible for their actions”.
Waters also said the House Financial Services Committee should invite First Republic’s chief executive to testify. The Senate Banking Committee’s previous invitations to the chief executives of SVB and Signature Bank in March were rejected, according to a follow-up letter from the committee to the chief executives.
Still, it was unclear on Monday whether the slow collapse of First Republic over the course of weeks, which culminated in the sale announcement, would be enough to rekindle Capitol Hill’s interest in legislation to tighten regulation of banks or impose tougher penalties on bank executives in a bank that failed.
with a series of new bill In the weeks since SVB’s collapse, Congress has yet to take any concrete action on the bank’s failure, aside from hearings with regulators.
bipartisan senate bill launch in late March Would give federal regulators more power to claw back executive pay at failed banks than is given under current law.
The bill has been referred to the Banking Commission, which has yet to adopt any specific legislation on bank failures.
In a statement Monday, the Massachusetts Democrat said the First Republic’s defeat “demonstrates how deregulation can make a too-big-to-fail problem worse.”
She added, “A poorly regulated bank being bought by a much bigger bank – and ultimately the taxpayer will be duped. Congress needs major reforms to fix the broken banking system.”