WASHINGTON, D.C. – Senator JD Vance (R-OH) questioned the Chairman of the Federal Deposit Insurance Corporation (FDIC) and the Vice Chairman for Supervision of the Federal Reserve during a hearing of the Senate Committee on Banking, Housing, and Urban Affairs.
Senator Vance raised concerns regarding the “moral hazard” created by bailing out Silicon Valley Bank’s uninsured deposits.
“I think the implication of what happened with Silicon Valley Bank is that there are a lot of people who expect that their uninsured deposits are effectively insured at an unlimited level, or if you’re a banker, there’s an assumption from a lot of people that at a certain level, if you’re systemically important enough, your uninsured depositors are going to get bailed out.” said Senator Vance.
Watch the full exchange here:
“What I worry about is the fundamental unfairness here, that we’ve drawn a line, and I don’t know whether the line stops at Silicon Valley Bank, maybe it goes much further, maybe it stops there, where if you’re systemically important, which is a term that’s impossible for anybody here to define with confidence, if you’re systemically important, your uninsured deposits are effectively unlimited in their insurance,” said Senator Vance. “Whereas if you’re not systemically important, if you’re a regional bank in Ohio, there’s a very good chance that your uninsured depositors will not receive that bailout. And I think that uncertainty is a really, really big problem with what you guys have done. I’m not saying that in an accusatory way, I understand that there were reasons to do what you did, even though I don’t think it was the right decision, I’m just saying I think it has some real moral hazard here.”