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Federal Reserve watchdog starts its own Silicon Valley Bank investigation

Seeking Alpha logo Seeking Alpha 3/29/2023

The Federal Reserve's Office of the Inspector General has started its own probe into the collapse of Silicon Valley Bank, after a run on the bank and unhedged long-term interest losses forced its closure on March 10. The investigation is separate from the Federal Reserve's investigation, which is being led by Vice Chair of Supervision Michael Barr.

The Inspector General's probe, which started March 14, will evaluate Silicon Valley Bank's supervision by the Federal Board of Governors and the Federal Reserve Bank of San Francisco, and will make recommedations as appropriate, an OIG spokesman told Seeking Alpha via email. The investigation is expected to take six months.

The Inspector General responsible for the Federal Reserve and the Consumer Financial Protection Bureau is appointed by the Federal Reserve Chair. The current IG, Mark Bialek, was appointed in 2011 by then-Fed Chair Ben Bernanke. Senators Elizabeth Warren (D-MA) and Tim Scott (R-SC) have introduced a bill that would make the IG role a presidentially appointed, Senate-confirmed one.

"Consistent with the IG Act, we have the same independence and authorities afforded to all Inspectors General to audit and investigate the Board," the OIG spokesman said. "We have and will continue to provide independent and robust oversight over both the Board and the CFPB."

In Senate testimony on Tuesday, Barr said the central bank's review will thoroughly examine its supervision of the bank. "If we didn't do the right steps, we're going to say that," he said. However, Senator Scott questioned whether the Fed would be rigorous enough in its scrutiny, calling the review "a case of the fox guarding the hen house."

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