US Federal Reserve Official Calls for Independent Investigation into Reasons for Banking Crisis
Dubai – An official at the US Federal Reserve has called for an “impartial and independent” investigation into the reasons behind the bankruptcy of several US banks at the beginning of the year. Michelle Bowman, a member of the US Federal Reserve Board of Governors, made the call during a seminar in Austria. She rejected proposals to increase the capital of banking institutions.
Bowman expressed concerns about a report on the investigation, which was published at the end of April and prepared by Vice President of the Reserve Banking Supervision Michael Barr. She stated that the report was not seen by the rest of the members of the Board before its publication. According to Agence France-Presse, Bowman questioned whether the report provides sufficient answers to what happened.
The US Federal Reserve report, published in April, acknowledged loopholes in the banking sector’s supervision and supported tightening oversight. It highlighted the bankruptcy of the Silicon Valley Bank and other banking institutions in early 2023. However, Bowman’s comments reflect divided opinions within the Board of Governors on how to proceed with oversight.
During a congressional hearing, Federal Reserve Chairman Jerome Powell addressed rumors about regulators increasing bank capital requirements, potentially reaching 20%. Powell stated that the capital requirements would be limited for the eight major banking institutions, while other banks may be less affected by the capital increase. He also emphasized that banks with assets of less than $100 billion should not be subject to the new measures.
In contrast, Bowman argued that there is no way to strengthen the supervision of large banks without first conducting an impartial and independent investigation into the causes of the bankruptcies. She stressed the importance of understanding what went wrong and being proactive in fixing the issues to avoid unexpected consequences. Bowman warned that a misperception and misunderstanding of the root causes of bankruptcies could have negative effects on banks, their customers, the financial system, and the economy as a whole.
Bowman suggested that an independent investigation would shed light on the effectiveness of necessary improvements in supervision and review of capital requirements. She believes this approach would better prepare institutions for access to liquidity, rather than simply increasing capital requirements for a number of banks. Bowman emphasized the need for regulatory and supervisory reforms to strengthen and safeguard the banking system.
The call for an independent investigation comes as the US banking sector continues to grapple with the aftermath of the recent crisis. It remains to be seen how the US Federal Reserve will respond to Bowman’s remarks and whether an investigation will be launched to address the concerns raised.
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What were the findings of the report on Ly 2021’s risky lending practices and inadequate risk management, and why does Bowman believe they require a more thorough and independent investigation?
Ly 2021 as a result of risky lending practices and inadequate risk management. The report also pointed out the need for stricter regulations and increased capital requirements to prevent future bank failures.
However, Bowman’s remarks suggest that she is not convinced by the findings of the report and believes that a more thorough and independent investigation is necessary. She raised concerns about the lack of input from other members of the Federal Reserve Board in the preparation of the report, which raises questions about its credibility and objectivity.
Bowman’s call for an independent investigation reflects the growing skepticism and frustration within the Federal Reserve about the handling of the banking crisis. It indicates a desire to uncover the root causes of the crisis and identify any systemic failures or misconduct that may have contributed to it.
The banking crisis has had far-reaching implications for the US economy, with millions of people losing their jobs and businesses going bankrupt. It is crucial that a comprehensive and unbiased investigation is conducted to restore confidence in the banking sector and prevent similar crises in the future.
It remains to be seen whether Bowman’s call for an independent investigation will be heeded and how it will be carried out. However, her remarks highlight the need for transparency, accountability, and a thorough understanding of the factors that led to the banking crisis. Only through such an investigation can effective measures be implemented to prevent a recurrence of such a catastrophic event.
