Federal Reserve Blamed for Silicon Valley Bank Downfall and Credit Suisse Crisis

Politicians, regulators, and bank executives are debating the Federal Reserve’s role in overseeing banks in light of SVB’s recent failure. But, analysts contend that the problem is more nuanced than that, and some have accused the Fed of neglecting to guarantee that banks function securely and properly. Due to the Fed’s rate rises and the $42 billion bank run by SVB, the bank was in severe need of cash. As a result, it had to sell bonds at a loss and faced a liquidity crisis. The bank’s reliance on uninsured deposits and its role as the top borrower from the Federal Home Loan Bank in San Francisco, according to analysts, were two warning indicators that the Fed should have been aware of. Despite this, Congress cut down restrictions on banks, including SVB, with less than $250 billion in assets, so they were exempt from an annual health check. The former CEO of SVB had pushed for this modification, claiming that the rules would put an unnecessary load on the bank. Others have questioned the role of the San Francisco Fed, which oversaw SVB’s supervision, as a result of the circumstance. Credit Suisse has also had problems and has had to borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank. Banks including Bank of America, Wells Fargo, and Citigroup have witnessed an increase in deposits since SVB’s problems began, despite the fact that the situation is still unresolved.