By contrast, two Senate Democrats — Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut — sent a letter to the Department of Justice and the Securities and Exchange Commission on Wednesday urging the agencies to investigate whether senior executives involved in the collapse of Silicon Valley Bank had fallen short of their regulatory responsibilities or violated laws.
Ms. Warren also unveiled legislation this week, co-sponsored by roughly 50 Democrats in the House and Senate, that would reimpose some of the Dodd-Frank requirements that were rolled back in 2018, including regular stress testing.
Senator Sherrod Brown, Democrat of Ohio and chairman of the Banking Committee, told reporters that he intended to hold a hearing examining what happened “as soon as we can.”
Mr. Barr, who started at the Fed last summer, was already reviewing a number of the Fed’s regulations to try to determine whether they were appropriately stern — a reality that had spurred intense lobbying as financial institutions resisted tougher oversight.
But the episode could make those counter efforts more challenging.
Late on Monday, the Bank Policy Institute, which represents 40 large banks and financial services companies, emailed journalists a list of its positions, including claims that the failures of Silicon Valley Bank and Signature Bank were caused by “primarily a failure of management and supervision rather than regulation” and that the panic surrounding the collapses proved how resilient big banks were to stress, since they were largely unaffected by it.
The trade group also emailed those talking points to congressional Democrats, but other trade groups, including the American Bankers Association, have stayed silent, according to a person familiar with the matter.
The fallout could also kill big banks’ attempts to roll back regulations that they say are inefficient. The largest banks had wanted the Fed to stop forcing them to hold cash equivalents to what they say are safe securities like U.S. government debt. But Silicon Valley Bank’s failure was caused in part by its decision to keep a large portion of depositors’ cash in longer-dated U.S. Treasury bonds, which lost value as interest rates rose.
“This definitely underscores why it is important that there be some capital requirement against government-backed securities,” said Sheila Bair, a former chair of the Federal Deposit Insurance Corporation.
Catie Edmondson contributed reporting.