Kerrigan in The Hill: The Fed Has the Rules to Regulate Banks – Why Weren’t They Enforced?

By SBE Council at 26 May, 2023, 8:20 pm

In a May 26 Op-ed in The Hill, SBE Council president & CEO Karen Kerrigan expresses concern about possible regulatory responses to the failure of Silicon Valley Bank (SVB). She urges regulators and lawmakers to understand the root causes and reasons behind the bank’s demise, rather than making responsibly managed banks pay for SVB’s mistakes and the passivity of regulators. Kerrigan writes:

“Getting to the true cause of the SVB fallout should be somber business because the wrong ‘solution’ could prove harmful to small businesses. Misplaced regulation imposed on blameless private sector players — in this case responsibly run regional banks — would squeeze capital availability more tightly, which would then generate much more painful and widespread outcomes than the actual failures of a few mismanaged banks accelerated and exacerbated by conditions largely created by the Federal Reserve.”

Kerrigan notes that the Fed already has the “rules and tools” to do its job, and Congress must demand an independent third-party review of what went wrong with the Fed’s oversight:

“Allowing a whitewashing of what could have been done to mitigate SVB’s crash will not be helpful. Moreover, it will likely lead to regulatory punishment for banks that are responsibly serving their customers and investors. Burdening an already highly regulated sector will only result in unnecessary downstream harm to our economy and small businesses.”

Read the full Op-Ed here.