Federal Reserve Blasted for Inaction on Silicon Valley Bank Collapse

The collapse of Silicon Valley Bank in March 2023 sent shockwaves through US financial markets. But a recent review has found that the Federal Reserve knew or should have known about serious problems at the bank as early as March 2022, yet failed to take timely action.

According to Michelle Bowman, the regulator's supervisory staff was aware of vulnerabilities such as substantial losses on securities and an unstable deposit base prone to mass withdrawals. However, they chose not to act until they were completely certain that a decision was correct, perpetuating a culture of risk aversion.

The review, conducted by Starling Advisory Group, was critical of the Federal Reserve's slow response to the bank's troubles. It found that employees believed it was safer not to act until all the facts were known, leading to delays in supervision.

Senator Elizabeth Warren criticized the report, saying it effectively exonerated Michelle Bowman and Donald Trump. She claimed that the document was an attempt to rewrite history and pave the way for further weakening of banking regulations.