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McHenry: “All options should be on the table” in allowing large banks to buy troubled smaller ones

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McHenry: "All options should be on the table" in allowing large banks to buy troubled 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 prevent a further crisis in the banking sector after sudden collapses of two banks this monthincluding allowing a large, oversized institution to fail to buy a smaller, troubled institution.

In an interview with “Face the Nation,” McHenry said Congress must investigate the circumstances that led to the shutdown Bank of Silicon Valley on March 10 and Signature Bank of New York two days later, as well The Biden administration’s responseincluding whether there was an opportunity for a larger 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 the who, what, when, where, why and how of these bank failures and decisions about it” last weekend by the Biden administration to apply emergency measures in order to strengthen the banking system and secure deposits in those banks.

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

McHenry said that while lawmakers don’t know whether the Biden administration had a viable buyer for the Silicon Valley bank last weekend, Congress received comments from bankers who say they were prevented from bidding to buy the failed lender.

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

CBS News

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

When asked whether a systemically large bank should be able to buy a troubled bank like First Republicof a regional lender hit by the collapse of a Silicon Valley bank, McHenry said “all options should be on the table.”

The rapid failure of the Silicon Valley bank renewed scrutiny of federal banking regulators and fueled debate on Capitol Hill over whether Congress should tighten rules on mid-sized banks. Sen. Elizabeth Warren, Democrat of Massachusetts, told “Face the Nation.”” on Sunday that the plan is to raise the Federal Deposit Insurance Corporation (FDIC) insurance cap above $250,000, although McHenry said he has not had “one conversation” with the White House or the Biden administration about changing deposit insurance levels.

“What I will do though, legislatively and in an oversight capacity, is determine whether we need to address the level of FDIC deposits,” he said. “We did it after the last financial crisis, we raised from $100,000 to $250,000.”

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

“If we do this, we have to understand their trade-offs,” he said. “It’s not a clean play of allowing a larger pool of insurance. It’s costing the financial system significantly, and community banks in particular. 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 Mary Daley, head of the San Francisco Fed, to answer questions from Congress.

“We need to understand the decisions that were made last weekend, from Thursday to Sunday night about whether or not there is a viable private sector solution. We also need to understand the underlying causes of the collapse of these banks, and we will get there,” he said. “The San Francisco Fed issue is a supervisory issue. We have to get to the bottom of whether this is a supervisory issue, a regulatory issue, a bank mismanagement issue, maybe all three, frankly.”

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