U.S. Federal Reserve points finger at Trump-era rollback for SVB demise

A 100-page report by the U.S. Federal Reserve shows bipartisan legislation in 2018 during Donald Trump’s presidency loosened post-financial crisis safeguards, encouraging the capital weakness that ultimately proved fatal to SVB.

The Federal Reserve on April 28 blamed the deregulatory zeal that occurred during the Donald Trump era for contributing to the second-largest bank failure in U.S. history, appearing to take a clear stand on an acrimonious policy divide in Washington.

Amid the turmoil that Silicon Valley Bank's implosion unleashed on the financial system last month, some Republicans and industry advocates have argued strenuously that a 2018 roll-back of post-financial-crisis safeguards was not to blame.

But the Fed's searing 100-page post-mortem says bipartisan legislation in 2018 loosened post-financial crisis safeguards, undermining oversight by hindering the work of bank supervisors and encouraging the capital weakness that ultimately proved fatal to SVB.

Greg Baer, president of the Bank Policy Institute, a lobby group, said the Fed had blamed the 2018 changes when the results of its own review showed "the fundamental misjudgments made by its examination teams."

According to the Fed, SVB's management bore significant blame and bank examiners also made grave missteps. The report, however, also pointed to the Fed's vice chair for supervision at the time, without naming him, for creating what it said was a culture of weak and lax supervision that favored inaction.

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Randal Quarles, who was appointed to the Fed by President Donald Trump in 2017, oversaw the Fed's bank supervision until his resignation in 2021.