SVB Sale & Congress Hearing on Collapse
On Sunday, The FDIC announced the sale of Silicon Valley Bank to First Citizens Bank. The news caused bank stocks to rally, and First Citizens Bank in particular gained an additional 53.7% in value following the news. The deal gave First Citizens Bank $72 billion dollars in assets, for the cost of just $16.5 billion.
The collapse of First Republic Bank and SVB, the 16th largest bank in the country, had caused a panic in the weeks prior. The news made many fear it would lead to a domino effect, possibly causing a nationwide bank run.
The federal government was quick to announce in the days following that it would be refunding all depositors at SVB and First Republic Bank. The FDICs settling of all depositor money from SVB cost the agency $20 billion in total. The funds will be replenished over time by new fees on banks.
Congress will hold a hearing on Tuesday going over the cause of Silicon Valley Bank and Signature Bank. The Chairman of the FDIC, Martin Gruenberg, and The Vice Chair for Supervision at The Federal Reserve, Michael Barr, will both be speaking at the hearings.
The bipartisan group of lawmakers questioning them are looking to bring confidence to Americans worried about the current situation. “I think this will bring a great deal of certainty and confidence to the market.” says Rep. Patrick McHenry (R-NC).
Some point to the 2018 deregulation of Dodd-Frank era laws as reasoning for the banks collapse. A new bill proposed by House and Senate Democrats would decrease the asset threshold for banks to qualify for enhanced regulation to $50 billion. The threshold was decreased back in 2018 from $50 billion to $250 billion.
While most Democrats would likely support the bill, it is unlikely they could gather much support from Republicans, who seem reluctant on the issue. Republicans like McHenry were hesitant to call for any expanded regulation following the SVB collapse. Other Republicans like Tim Scott (R-SC) opposed the idea. He stated that he wants to focus the investigation more on what happened, calling remarks about regulation a “red herring”.