Huizenga Delivers Remarks at Hearing on GAO's Preliminary Review of Recent Bank Failures

Press Release

Today's hearing is entitled, "Oversight of Silicon Valley Bank and Signature Bank: GAO's Preliminary Review.'

"Congressional oversight is a constitutional authority, used to maintain the well-being of our system of government.

"The Government Accountability Office is an investigative arm of Congress. They provide fact-based, non-partisan information that can be used to improve government and save taxpayers billions of dollars.

"Committee Republicans and Democrats should support robust oversight of our financial regulators, aiming to seek transparency and demanding accountability.

"Unfortunately, as you will hear in testimony today, regulators in Washington are attempting to paint a different picture. But the facts are clear.

"The collapse of SVB and Signature Bank were the result of risky business strategies and years of failed supervisory action.

"In fact, some of the concerns identified in GAO's April report are not new. In a 2013 report titled "Financial Institutions: Causes and Consequences of Recent Bank Failures,' the GAO highlighted that aggressive growth strategies using nontraditional, riskier funding, (similar to those of SVB and Signature), were key factors in bank failures.

"These uninsured, unstable deposits accounted for much of SVB and Signature Bank total assets, which, the FDIC noted in 2019 "could pose risks to regional banks.'

"SVB was also affected by rising interest rates- which was fueled by reckless spending and a Federal Reserve that was late to react.

"A 2015 GAO report on bank failures concluded that the regulatory process was not always effective or timely in correcting the underlying problems before the banks failed.

"In the years prior to their collapse, the Federal Reserve and the FDIC identified management risks at both banks- yet allowed those risks to go unfixed. The failure of federal regulators to mitigate or escalate management concerns proved costly.

"Finally, the GAO's report also examines Treasury's use of the systemic risk exception (SRE) and the establishment of the Bank Term Funding Program.

"Particularly, the use of the SRE, a powerful, emergency tool, has not been without criticism. As part of our investigation into the government's response to these bank failures, the subcommittee hopes to better understand how the Federal Reserve and the FDIC concluded that recommending use of the SRE was a last resort.

"Again, the GAO reported that the use of the systemic risk exception "may weaken market participants' incentives to properly manage risk.'

"While the Treasury Secretary has warned the public not to assume these actions create a guarantee of deposits, it is hard to think otherwise. Ultimately, whatever losses to the deposit insurance fund will be passed down to hardworking Americans.

"As the Biden Administration and the Federal Reserve attempt to shift the narrative, the GAO's report provides no evidence the failure of SVB or Signature Bank were a result of relaxed regulations.

"The American people deserve answers. We should not allow history to be rewritten. I am committed to making sure this subcommittee doesn't just draw conclusions but bases its findings on evidence. That is what oversight is and as Chairman, that is my commitment to our members.

"I welcome the FDIC and the Federal Reserve appearing at a future subcommittee hearing to further answer our questions.

"I look forward to hearing from Director Clements and I yield back the balance of my time."

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