FOR IMMEDIATE RELEASE
Contact: Timi Iwayemi, [email protected]
Michael Barr’s Fintech Partnerships May Cloud Judgment Of SVB Autopsy
In response to recent bank failures, corresponding bailouts, and potential forthcoming regulatory actions, Revolving Door Project Research Director Timi Iwayemi released the following statement on the Federal Reserve’s Vice Chair for Supervision, Michael Barr:
“Federal Reserve Vice Chair for Supervision Michael Barr has been tasked with leading a review of his agency’s supervisory failings leading up to the crisis. This follows an admission by Barr in a speech at the Peterson Institute for International Economics just last week that the Fed ‘tend[s] to have a very light-touch approach to smaller institutions.’ That designation likely covers a significant number of banking institutions, given the 2018 rollbacks of Dodd-Frank protections which diminished oversight authority. While it is critical to repeal Trump’s deregulatory banking law, it’s also important to ask why Barr and Fed Chair Jerome Powell ignored troubling signs at these failed institutions right until the crash. The central bank has been eager to unnecessarily hike rates and discipline labor; banking analysts had identified the declining value of bank assets publicly for months; why then did the Federal Reserve not match its tightening zeal with serious oversight of bank’s balance sheets?”
“We have noted multiple times that Barr’s extensive connections to the fintech and crypto industries should rule him out of a supervisory role at the Fed which could markedly alter the trajectory of those industries. In fact, the SVB bailout ensured the continuity of Circle’s stablecoin USDC, which had initially lost its peg amid disquietude about the $3.3 billion in deposits which the crypto company parked at the bank. It’s also likely that Barr’s former colleagues at NYCA partners, which funds a significant number of crypto and fintech firms, benefitted from this government backstop.”
“As of now, Barr is assigned to investigate supervisory failures that occurred under his watch featuring a bank that catered in particular to the crypto and fintech industries which Barr was so active in immediately prior to revolving back into government. Barr is a walking conflict of interest. His central role in the investigation is damning.”
“As much as we welcome a review of internal deliberations in the build up to the crisis, we are skeptical of the Fed’s ability to undergo a credible internal investigation following the apex bank’s conduct during the ethics scandals of 2021. To secure the public’s trust, Barr and Powell must commit to publishing examination reports of these failed banks as well as the Fed’s supervisors opinion on the banks’ aggressive risk-taking activity in the period leading up to their collapse. Better yet, Fed officials can step aside to allow an independent Inspector General to conduct an investigation of its regulatory failures. Additionally, this is an opportunity for Congress to also flex its oversight powers—the failure of the country’s 16th largest bank requires an exhaustive review which would include hearings and a standing commission with subpoena authority.”
“SVB’s collapse is the largest bank failure in the United States since the Great Financial Crisis; the public deserves a fair and detailed response to assure them of the ongoing safety and soundness of the financial system. The investigation cannot be helmed by a man, Michael Barr, who likely will be implicated in the findings of any thorough examination of this failure.”
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PHOTO CREDIT: “Michael Barr” by Center for American Progress is licensed under CC BY-ND 2.0.