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McHenry: ‘All options should be on the table’ in allowing big banks to buy struggling smaller ones

Washington- Rep. Patrick McHenry, chairman of the House Financial Services Committee, said Sunday he believes “all options should be on the table” to avoid another crisis in the banking industry after the sudden bankruptcies of two banks this monthincluding allowing a large too-big-to-fail institution to buy a smaller, struggling one.

In an interview with “Face the Nation,” McHenry said Congress needs to explore the circumstances that led to the shutdown of Silicon Valley Bank on March 10 And New York Signature Bank two days later, as well as the Biden administration responseincluding whether it was possible for a major bank to step in and save the two failing institutions.

The North Carolina Republican that “what I need to get to the bottom of the investigation, in Congress, is who, what, when, where, why and how of these bank failures and the decision taken” the last weekend by the Biden administration of deploy emergency measures to consolidate the banking system and guarantee deposits in these banks.

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

McHenry said while lawmakers were unsure whether the Biden administration had a viable buyer for Silicon Valley Bank last weekend, Congress received comments from bankers saying they were barred from bidding to acquire the defaulting lender.

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

CBS News

“I think we know we’ve had a very tough week for US banks and we’ve lost confidence,” he said. “And I think that raises questions about what happened last weekend.”

To the question of whether a large systemic bank should be able to buy a troubled bank like the First Republica regional lender battered by the collapse of Silicon Valley Bank, McHenry said “all options should be on the table.”

The quick failure of Silicon Valley Bank has renewed scrutiny from federal banking regulators and sparked discussions on Capitol Hill about whether Congress should tighten rules on midsize banks. Senator Elizabeth Warren, Democrat of Massachusetts, said “Facing the Nationon Sunday that she favored a plan to raise the Federal Deposit Insurance Corporation (FDIC) insurance cap above $250,000, although McHenry said he had not had “a only conversation” with the White House or the Biden administration on changing deposit insurance levels.

“What I will do though, legislatively and in an oversight function, is determine whether or not we should adjust the FDIC filing level,” he said. “We did this after the last financial crisis, raising $100,000 to $250,000.”

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

“If we do that, we have to understand their trade-offs,” he said. “It’s not a pure game to allow a bigger set of insurance coverage. It’s costing the financial system, and especially community banks, a lot. We have to look at that very carefully.”

McHenry has already scheduled a hearing of his financial services committee with the head of the FDIC and the Federal Reserve’s vice chairman for oversight. But he did not say whether he planned to call on San Francisco Fed chief Mary Daly to answer questions from Congress.

“We need to understand the decisions that were made over the last weekend, from Thursday to Sunday evening, about whether or not there is a viable solution for the private sector. We also need to understand the underlying causes of the collapse of these banks, and we’re going to go for it,” he said. “The San Francisco Fed issue is a supervisory issue. We have to figure out whether or not this is a supervisory issue, a regulatory issue, a banking mismanagement issue, maybe – be all three frankly.”


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