Lack of Transparency Raises Concerns about Financial System Safety
House lawmakers tore into top U.S. bank regulators, criticizing their incompetence in supervising banks. The House Financial Services chairman, Rep. Patrick McHenry, criticized the competency of Federal Reserve, Treasury, and FDIC officials. One key concern was the lack of transparency from regulators during the weekend of bank collapse that raised concerns about the safety of the financial system.
Regulators were criticized for being inactive even after having clear knowledge of insufficient risk management while supervising Silicon Valley Bank (SVB). This led to SVB’s failure and sale, igniting a debate about the role of the federal government in steering the economy.
Federal Deposit Insurance Corporation’s Actions Ignite Debate Over Public Safety Net
Lawmakers are questioning whether the FDIC properly considered all options in dealing with SVB’s collapse. FDIC Chair Martin Gruenberg’s caution has played into criticism from both government officials and the banking industry that FDIC did not have enough urgency in seeking a buyer for SVB.
The FDIC’s moves could have long term reverberations and ignite a debate about whether to expand the public safety net of deposit insurance. Ultimately, FDIC along with the Federal Reserve and Treasury Secretary Janet Yellen unanimously voted to bypass “least cost” requirements to prevent financial turmoil and potential runs on other healthier institutions.
SVB’s loans and deposits were sold to another regional lender, First Citizens. This raises questions about whether this should have happened or if stronger regulations should have been put in place to prevent this type of collapse.
Push for Stronger Banking Regulations Following Collapse
Following the collapse of SVB and Signature Bank, Democratic Congressmember Ro Khanna is pushing for stronger banking regulations. Khanna criticizes fellow Democrats who supported a 2018 bill that weakened Dodd-Frank, a landmark regulatory reform passed in the wake of the 2008 financial crisis. Silicon Valley Bank and Signature Bank executives successfully lobbied to weaken rules that may have prevented their collapse.
Khanna believes that large regional banks should be regulated the same way as the Big Four banks. The Federal Deposit Insurance Corporation (FDIC) is supposed to be regulating these regional banks, but they would have much more authority if they had Dodd-Frank type regulations.
TikTok’s Ties to China and Its Impact on User Data Security
The spread of TikTok into the United States has raised concerns about the app’s ties to the Chinese government and its impact on user data security. In front of House lawmakers, TikTok CEO Shou Zi Chew was grilled for over five hours regarding the app’s ties to the Chinese government, data practices, and its effects on children’s mental health.
The Biden administration demanded that the Chinese-owned TikTok be sold or else face a national ban in the United States. There is a bipartisan push to ban TikTok unless it’s sold to a non-Chinese corporation.
Representative Ro Khanna explains that broader social media reform is needed to protect young children and teenagers from addiction and mental harm caused by social media platforms. There are legitimate concerns regarding TikTok’s ties with Communist Party officials and their potential to prioritize or deprioritize information about human rights and other issues. TikTok’s ties to the Chinese government pose a risk to ByteDance and TikTok if the CCP gains control.
Congressional visits and the United States pledging hundreds of millions of dollars in weapons to Taiwan could further escalate tension between the United States and China. The push for stronger banking regulations following Silicon Valley Bank’s failure shows how tied together national security, economic security, and technology are becoming in our interconnected world.
Image Source: Wikimedia Commons
