Senator Shelley Moore Capito assesses the American banking industry as strong, despite recent turmoil among regional banks.
“I do think our banking and our financial system is safe. I do,” Capito said today on MetroNews’ “Talkline.”
California-based Silicon Valley Bank and Signature Bank based in New York collapsed over the weekend, causing a ripple effect through the economy. The banks had in common a high rate of uninsured deposits and bonds or loans with a long time to maturity.
First Republic, another regional bank, has also been under strain and is being helped in a rescue effort by other lenders.
Capito, who has served on committees relating to the banking industry, expressed frustration about oversight.
“Where were the regulators? The regulators had to be looking at the SVB bank and saying to themselves the average amount of insured depositors at that bank was less than 10 percent,” she said, contending that percentage should have been significantly higher.
“So there was a heavy concentration of money from hedge funds and from the venture capital community. So why did the regulators not put a red flag on that? Why did the regulators not look at what they were doing when they were buying long-term financial instruments to get the higher rates? Yet they’re blaming the higher interest rates on their failure. How can they not see that coming?”
U.S. Treasury Secretary Janet Yellen today agreed that, overall, the banking industry remains stable. Federal authorities moved last weekend to protect uninsured deposits at Silicon Valley Bank.
“Our banking system remains sound and Americans can feel confident that their deposits will be there when they need them,” Yellen said.
Trustees and representatives of the West Virginia Investment Management Board this week received a memorandum from executive director Craig Slaughter describing no direct exposure.
“While the WVIMB does not have any direct debt or equity exposure to SVB or SBNY, many of our private partnerships, as well as some of the underlying fund investments, have longstanding banking relationships with both entities,” the memo stated.
“Staff has been working diligently to evaluate the situation and has been in contact with our general partners that have known exposure.”
State Treasurer Riley Moore this week also described no direct exposure for the board, which manages the $10 billion consolidated fund of short-term investments for state and local governments.
“I want our taxpayers to rest assured we did not have any funds or holdings invested in Silicon Valley Bank or the two other high-profile bank failures, Silvergate and Signature Bank,” Moore stated this week.
Moore said the Silicon Valley Bank collapse was an extreme circumstance that left that bank and those closely tied to it especially vulnerable.
“Silicon Valley Bank did an extraordinary amount of lending in the high-risk venture capital and technology space,” he said. “As the Fed hiked interest rates and tightened financial conditions in response to the extreme inflation of recent years, this bank simply could not keep up with the liquidity demands to adjust to this rising rate environment.”