Fallout from Silicon Valley Bank collapse to dominate Capitol Hill

Mychael Schnell
·7 min read
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The collapse of Silicon Valley Bank (SVB) is likely to dominate chatter on Capitol Hill this week, as lawmakers look to learn more about the bank failure and regulators seek to calm the banking industry.

Regulators shut down Silicon Valley Bank on Friday after the institution saw a significant run amid liquidity issues, marking the largest bank failure since the 2008 recession and the second-largest in U.S. history.

But on Sunday — after a weekend marked by concerns regarding the banking industry — top financial officials announced that SVB depositors will have access to all their funds starting Monday, a fix to calm markets ahead of this week’s opening bells. No such assurances were made to shareholders of the bank.

Lawmakers this week, however, will likely have more questions about SVB’s collapse when they return to Capitol Hill.

Also this week, the Senate is slated to vote on the nomination of Eric Garcetti to serve as ambassador to India, after the former Los Angeles mayor’s confirmation process was held up amid accusations that he knew about allegations of sexual misconduct against his former top aide.

And, the Senate may vote on a resolution to overturn a Biden administration water regulation, after the House cleared the measure last week. A number of Senate and House committee hearings are also scheduled. The House is out of session this week.

Lawmakers dig into Silicon Valley Bank failure

The Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) announced jointly on Sunday that all depositors of Silicon Valley Bank would “have access to all of their money starting Monday,” a move meant to calm the banking industry and ease markets ahead of this week’s opening bells.

The trio of groups — headed by Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell and FDIC Chairman Martin Gruenberg — said “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

They simultaneously announced that another bank — Signature Bank of New York — was closed by its state chartering authority on Sunday, the third largest bank failure in U.S. history.

“The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry,” the trio wrote in a joint statement. “Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”

Separately, the Federal Reserve Board announced that it was creating a new Bank Term Funding Program that would provide loans to banks in the U.S.

President Biden on Sunday applauded the “prompt solution,” and said he directed the Treasury secretary and National Economic Council director to work with banking regulators to address the issues at the banks.

“I am pleased that they reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe. The solution also ensures that taxpayer dollars are not put at risk,” he wrote in a statement. “The American people and American businesses can have confidence that their bank deposits will be there when they need them.”

The president said he will deliver remarks Monday morning “on how we will maintain a resilient banking system to protect our historic economic recovery.”

Members of Congress were briefed on the announcement Sunday evening, according to multiple outlets.

In a joint statement later Sunday night, Senate Banking Chair Sherrod Brown (D-Ohio) and Rep. Maxine Waters (D-Calif.), the ranking member of the House Financial Services Committee, said the action “will enable workers to receive their paychecks and for small businesses to survive, while providing depository institutions with more liquidity options to weather the storm”

“As we work to better understand all of the factors that contributed to the events of the last several days and how to strengthen guardrails for the largest banks, we urge financial regulators to ensure the banking system remains stable, strong and resilient, and depositors’ money is safe,” they added. “Americans should continue to be confident in their preferred financial institutions in their communities.”

The announcements came after a weekend effort by regulators to try and find a bank to take over SVB. Yellen and lawmakers from both parties on Sunday ruled out the possibility of a bailout for Silicon Valley Bank’s owners and investors. A number of lawmakers endorsed the acquisition strategy.

“While today’s actions will fortunately calm market fears, it is an upsetting precedent. Based on news reports, the FDIC seems to have rejected market buyers of SVB & instead turned the Fed & Treasury into an even bigger safety net,” Sen. Bill Hagerty (R-Tenn.) wrote on Twitter.

“I am looking forward to hearing why the FDIC deemed market buyers’ bids insufficient,” he added in a subsequent tweet.

Senate to vote on Garcetti nomination

The Senate is set to vote this week on confirming Eric Garcetti to be ambassador to India, the final step in what has been a year-plus process for the former Los Angeles mayor.

The Senate Foreign Relations Committee advanced Garcetti’s nomination last week, then Senate Majority Leader Chuck Schumer (D-N.Y.) filed cloture, teeing up a final vote for the full chamber.

Biden nominated Garcetti to serve as ambassador to India in July 2021, and the foreign relations panel advanced his nomination in January 2022 — during the previous Congress. But the process has since been held up amid claims that Garcetti knew about allegations of sexual misconduct against his former senior advisor.

Sen. Chuck Grassley (R-Iowa) released a report in May 2022 that said Garcetti “likely knew or should have known” about the allegations against his former chief of staff Rick Jacobs. In response to that report, a spokesperson for Garcetti said the mayor “never witnessed or was made aware of sexual harassment.”

Two Republicans — Sens. Todd Young (Ind.) and Bill Hagerty (Tenn.) — joined all Democrats on the Foreign Relations panel last week to again advance Garcetti’s nomination. A majority of senators voting must back Garcetti’s nomination for it to be confirmed.

Potential Senate vote on Biden’s water regulation

The Senate this week could vote on a resolution to overturn a Biden administration water regulation, after the House cleared the measure last week.

Sen. Shelley Moore Capito (R-W.Va.), the vice chair of the GOP conference, told reporters last week that the disapproval resolution could come to the floor this week, predicting it would pass and head to Biden’s desk.

Biden will veto the measure if it clears both chambers, according to a Statement of Administration Policy.

The regulation in question determines which waters must abide by certain federal regulations. Generally speaking, the Biden administration has a broader outlook on which bodies of water should be protected when compared to the perspective of the Trump administration.

A spokesperson for Sen. Joe Manchin (D-W.Va.) told The Hill last week that the West Virginia Democrat will support the disapproval resolution, and Sen. Jon Tester (D-Mont.) said he is undecided — two senators who are among the most vulnerable Democrats facing reelection in 2024.

The House passed the disapproval resolution in a 277-198 vote. One Republican, Rep. Brian Fitzpatrick (R-Pa.), crossed the aisle to oppose the measure, while nine Democrats voted “yes.”

Senate, House committees to hold hearings

A number of Senate and House committees are slated to hold hearings this week on matters including the situation at the southern border and Biden’s budget proposal.

  • Senate Foreign Relations Committee: “The Future of U.S.-Brazil Relations”

    • When: Wednesday at 10:30 a.m.

    • Witnesses: Brian Nichols, assistant secretary of state for Western Hemisphere affairs at the State Department; Richard Duke, deputy special presidential envoy for climate at the State Department

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