U.S. Senate prepares first hearings on the failure of Silicon Valley Bank, Signature Bank

Yahoo Finance Live’s Rachelle Akuffo discusses the expectations for U.S. Senate hearings on recent bank failures.

Video Transcript

- We are moments away from the start of the Senate's first hearing on the failures of Silicon Valley Bank and Signature Bank, with lawmakers expected to grill regulators on how they handled the crisis and ensuing bank contagion fears. Rachelle Akuffo is going to be monitoring that, of course, and helming the 11:00 AM hour. And so what are we expecting here? We've gotten some of the statements that are out already. And so we know a little bit of the flavor of what some of the responses are going to be.

RACHELLE AKUFFO: We do. I mean, and going into this, this is going to be a bipartisan hearing, where we have both Democrats and Republicans that will be focusing on different sorts of areas of blame here. So you have the Democrats who'll be looking at the impact of regulatory rollbacks, Republicans, meanwhile, primarily focusing on the lack of provision by the Fed, the Treasury, and the FDIC.

We'll be hearing from the chairman of the FDIC, Martin Gruenberg, and the Fed vice chair for supervision. That's Michael Barr. They'll be among those testifying. And as we mentioned there, that prepared testimony is out. Now, Gruenberg is going to be putting some figures to some of this fallout here. The cost to the deposit insurance fund to cover SVB, you're looking at $20 billion. $18 billion, that's covering uninsured depositors, and for Signature Bank, $2.5 billion, $1.6 billion of that going to uninsured depositors.

Now, these amounts are still subject to change. They're still going through the numbers at the moment. But we know that Gruenberg is also going to hint or at least tap into some of these regulatory changes that he'd like to see from midsized banks in his prepared remarks.

He'll say, quote, "The potential regulation of these institutions merits serious attention, particularly for capital, liquidity, and interest rate risk. This would include the capital treatment associated with unrealized losses in banks' securities portfolios. Resolution plan requirements for these institutions also merits review." It's really highlighting what he's going to be focused on. Those unrealized losses clearly were the big headline for these banks failing.

And then also looking at Barr's prepared remarks, he's going to testify that SVB failed because the bank's management did not effectively manage its interest rate and liquidity risks, something that we've been talking about. But also SVB's failure demands a thorough review of what happened, including the Fed's oversight of the bank. I'm committed to ensuring that the Federal Reserve fully accounts for any supervisory or regulatory failings and that we fully address what went wrong, so still taking some accountability in terms of the engagement between the Fed and these banks.

So I mean, we're really looking for accountability that lawmakers are going to be pressing on, but also reassuring the American public that the banking sector is stable. Now, consider this a preview because we're going to be getting a full report from both Barr and Greenberg on May 1. So this will be a taste of what to expect, but obviously still ongoing reviews at the moment.

- And some grandstanding too we can expect on the other side. I'm going to-- we need a drinking game for every time they say, how did this happen?

- Oh, yes.

- When one of members, one of the senators say that.

- It's like, I already answered that question actually before in my prepared statements.

- Yeah, they're still going-- they're still going to ask it.

- They're still going to do it. Yes, theater runs abound in Washington, DC. Thanks so much.