The consulting firm Starling Advisory Group conducted an outside review of the Federal Reserve's actions regarding the failure of Silicon Valley Bank in March 2023. Fed Vice Chair for Supervision Michelle Bowman stated that the review concluded that Fed staff 'knew, or should have known' about the bank's risks before the crisis occurred.
Silicon Valley Bank faced a significant run after announcing a $1.8 billion loss from securities sales and a need to raise capital, largely due to the depreciation of its substantial U.S. Treasury holdings following the Fed's interest rate hikes. The bank's deposits were heavily concentrated, with 94 percent being uninsured and primarily from venture capital-backed tech firms.
Following the bank's collapse, the Federal Deposit Insurance Corporation and the Fed intervened to close it and protect depositors. The earlier review by then-Vice Chair for Supervision Michael Barr suggested that the Fed was overly cautious in its response, but the new findings imply a deeper failure in recognizing the risks.
This situation may lead to renewed scrutiny of Barr's actions during the crisis, especially as he stepped down in February 2025, allowing President Trump to appoint a new regulator. Trump's previous criticisms of the Fed's board as 'hostile' could also influence future regulatory decisions, particularly regarding Barr's position