By Ann Saphir
(Reuters) – Responsibility for the Federal Reserve’s oversight of large financial institutions like the failed Silicon Valley Bank rests with staff in Washington and not with any regional Fed bank chief, a former chair of the San Francisco Fed bank said on Friday.
“The regulatory regime at the Reserve Bank is that they (bank examiners) are housed in the district offices and report to the Board of Governors; they do not report to the (Reserve Bank) president,” said Alex Mehran, who served on the San Francisco Fed’s board of directors for six years including two as its chair.
“The responsibility for enforcing those regulations is not the purview of the president, it’s the purview of the regulators in Washington,” he said. “I do not believe that (San Francisco Fed Bank President) Mary Daly is responsible for the regulatory mishaps in the SVB situation.”
Democratic Senator Elizabeth Warren said she does not have faith in Daly after the collapse.
SVB’s sudden demise two weeks ago is under intense scrutiny.
Lawmakers in both houses of the U.S. Congress will next week hold public hearings on the issue, and have called Fed Vice Chair of Supervision Michael Barr to testify.
Barr is heading up a Fed review of the situation, due to be published May 1.
Fed Chair Jerome Powell said this week he wants to identify “what went wrong here” even as bank examiners at San Francisco Fed had flagged escalating problems at the Santa Clara-based bank suggesting issues with the bank’s ability to meet short-term cash needs like depositor withdrawals.
Federal regulators closed SVB on March 10 after it was unable to meet rapid and massive demands from depositors for their money.
That was soon followed by the closure of Signature Bank and emergency action by the Fed and the Treasury to shore up confidence in the banking sector, but the fallout has continued, with UBS buying rival Credit Suisse, big U.S. banks staging a rescue of smaller First Republic, and banking shares under continued pressure.
Republicans on the Senate Banking committee this week asked Daly and Fed Chair Jerome Powell for internal records on oversight of the bank, including Daly’s own calendar.
As San Francisco Fed chair, Mehran headed the search committee that hired Daly for the top job at the bank in 2018.
(Reporting by Ann Saphir; Editing by Sandra Maler)