Federal Reserve Accused of Withholding Information in Silicon Valley Bank Collapse

The House Committee on Oversight and Accountability is conducting an investigation into the failure of Silicon Valley Bank (SVB). The Committee has been in communication with the Federal Reserve Board (Fed Board) and the San Francisco Federal Reserve Bank (SF Fed) to request documents and records critical to their investigation.

On April 27, 2023, the Committee sent a request to SF Fed President Mary Daly for numerous documents and records. However, the Committee dissatisfaction with the SF Fed’s response, claim they included only publicly available information and was not responsive to their specific requests.

The Committee’s concerns escalated when the SF Fed informed them that the Fed Board was asserting privilege over a majority of the requested materials as confidential supervisory information (CSI). The SF Fed then stated that they would not be able to provide any more information to the Committee.

“The Committee on Oversight and Accountability is conducting an investigation into the failure of Silicon Valley Bank. We have had several discussions related to document production with staff of the SF Fed and your staff at the Federal Reserve Board. We write to memorialize those conversations and to request additional information in the possession of the Fed Board to assist the Committee in its investigation into the failure of SVB,” House Oversight wrote.

On June 1, 2023, the Committee met with the Fed Board staff to discuss their concerns about the assertion of a blanket privilege over all the requested documents. The Fed Board staff agreed to turn over non-public CSI materials and other responsive documents.

However, the Committee has not yet received any communications responsive to their requests.

In March 2023, Silicon Valley Bank, the prominent tech-focused lender valued at $212 billion, abruptly collapsed. The event, marked as the most significant bank failure since the 2008 financial crisis, has had far-reaching effects, impacting bank stocks and unmasking underlying financial strains.

In a dramatic turn of events, SVB transitioned from being solvent to insolvent within just two days as a result of a bank run, where depositors hurriedly withdrew their funds. This led to a staggering $42 billion being withdrawn in a single day. The root cause of SVB’s downfall is attributed to dislocations triggered by increased rates.

The failure of SVB has sparked worries about the possibility of a broader financial crisis. Recent studies indicate that vast regions of the country are still susceptible to a widespread bank failure if a run on deposits were to occur.

Prior to the collapse, the Federal Reserve had detected substantial issues at SVB. In early 2023, the bank was subjected to a “horizontal review” by the Fed, a process designed to evaluate the level of risk.

The Committee’s initial request included examination or audit reports related to SVB, a list of individuals present at discussions where warnings against SVB were issued, minutes of the SF Fed Board meetings, and all communications between the SF Fed and other federal entities related to SVB, among others.

In addition to the initial request, the Committee has asked for unredacted copies of all interviews related to the Fed Board’s April 28, 2023, report on the failure of SVB, minutes and related documents for the Federal Reserve Board’s Committee on Supervision and Regulation, and all communications related to SVB between the Board’s supervisory staff or the SF Fed.