Washington — Rep. Patrick McHenry, the chair of the House Financial Services Committee, said Sunday that he believes “all options should be on the table” to prevent further crisis in the banking sector following the abrupt collapses of two banks this month, including allowing a large, too-big-to-fail institution to buy a smaller, troubled one.
In an interview with “Face the Nation,” McHenry said Congress must explore the circumstances that led to the closures of Silicon Valley Bank on March 10 and Signature Bank of New York two days later, as well as the Biden administration’s response, including whether there was the opportunity for a larger bank to step in and rescue the two failing institutions.
The North Carolina Republican that “what I need to get to the bottom of investigatively, in Congress, is the who, what, when, where, why, and how of these bank failures and the decision over” last weekend by the Biden administration to deploy emergency measures to shore up the banking system and backstop deposits at those banks.
“We saw a private sector response 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 it less turbulent for America?”
McHenry said while lawmakers do not know whether the Biden administration had a viable buyer for Silicon Valley Bank last weekend, Congress has received comments from bankers saying they were prevented from bidding to acquire the failed lender.
“I think we know we had a very rough week for American banking, and we lost confidence,” he said. “And I think that raises the questions of what happened last weekend.”
Asked whether a systemically large bank should be able to buy a troubled bank like First Republic, a regional lender battered by the collapse of Silicon Valley Bank, McHenry said “all options should be on the table.”
The rapid failure of Silicon Valley Bank has renewed scrutiny on federal banking regulators and prompted discussions on Capitol Hill of whether Congress should tighten rules on mid-sized banks. Sen. Elizabeth Warren, a Massachusetts Democrat, told “Face the Nation” on Sunday that she favors a plan to lift the Federal Deposit Insurance Corporation’s (FDIC) insurance cap above $250,000, though McHenry said he has not had “a single conversation” with the White House or Biden administration about changing the deposit insurance levels.
“What I will do though, legislatively, and in an oversight function is to determine whether or not we need to address the FDIC deposit level,” he said. “We did it after the last financial crisis, raising from $100,000 to $250,000.”
But McHenry said “all options are on the table” for responding to the banking crisis.
“If we do this, we have to understand their trade-offs,” he said. “It is not a pure play of allowing a larger set of insurance coverage. It costs the financial system significantly, and especially community banks. We need to look very carefully at this.”
McHenry has already scheduled a hearing of his Financial Services Committee with the head of the FDIC and Federal Reserve’s vice chair for supervision. But he did not say whether he plans to call on Mary Daly, head of the San Francisco Fed, to answer questions from Congress.
“We need to understand the decisions that were made last weekend, from Thursday until Sunday night on whether or not there’s a viable private sector solution. We also need to understand the underlying causes of the collapse of these banks, and we’re going to get to that,” he said. “The question of the San Francisco Fed is a question of supervision. We need to get to the bottom of whether or not this is a supervisory problem, regulatory problem, a bank mismanagement problem, perhaps all three in all frankness.”