WASHINGTON — The top Republicans on committees that oversee the U.S. financial system sent letters Monday to Federal Reserve Chair Jay Powell and FDIC Chair Martin Gruenberg formally requesting documents and personnel records related to the oversight of two banks that failed over the last 11 days.
The lawmakers wanted "full information about what appears to be glaring bank mismanagement, fundamental lack of prudence in bank risk and balance sheet management, and regulators' lack of basic supervision and enforcement of safety and soundness rules, regulations, and principles," wrote House Financial Services Committee Chairman Patrick McHenry, N.C., and Senate Banking Committee ranking member Sen. Tim Scott, S.C.
A spokesperson for the Federal Reserve told CNBC on Monday it received its letter and planned to respond. A spokesperson for the FDIC declined to comment, citing agency policy regarding congressional correspondence.
The letters come as Congress seeks to learn more about how the second largest bank collapse in U.S. history unfolded earlier this month, when Silicon Valley Bank went in just a matter of days from fully operational to government owned on March 10. New York-based Signature Bank failed two days later before U.S. bank regulators put in a backstop to cover uninsured deposits and other safeguards for the broader system.
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The Scott and McHenry letter also requested a timeline of regulators' decision-making in the hours and days following the initial closure of SVB and Signature.
Specifically, GOP lawmakers are questioning the Treasury Department's designation that the collapse of SVB and Signature — and the potential losses of hundreds of billions of uninsured deposits — posed a systemic risk to the banking sector.
That designation gave it authority to unwind both institutions in a way that it said "fully protects all depositors," by tapping the FDIC's deposit insurance fund to cover uninsured deposits.
The Fed also created a Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the bank failures.
In the days following the collapse, reports have emerged indicating that Silicon Valley Bank ignored repeated warnings from regulators that the bank would be at risk of collapse in the event that interest rates rose quickly.
Both Republicans and Democrats in Congress have raised questions about whether regulators ignored signs of trouble at the banks or failed to take appropriate action in response to weaknesses that they did see.
But while Democrats have been quick to call for a return to more stringent regulations and capital requirements for mid-sized banks, Republicans have so far indicated they would oppose additional regulations.
Rather than suggest the Fed and FDIC did not regulate the banks tightly enough, Republicans instead suggested that culpability may lie with individual regulators, not the overall regulatory landscape.
The letters sent Monday also advised both the Fed and the FDIC to preserve all records of their oversight of the two failed banks, a request that telegraphs the intent to open a congressional investigation.
With Republicans in the majority in the House, McHenry has broad discretion as to how he will direct the committee he chairs to proceed in any investigation.
On the Senate side, however, the Senate Banking Committee is chaired by Ohio Democratic Sen. Sherrod Brown, with Scott as the No. 2.
Last week, Brown sent a letter of his own to Gruenberg, Treasury Secretary Janet Yellen, and Michael Barr, the vice chair for supervision at the Federal Reserve board. In it, Brown suggested that responsibility for the bank failures lay in part with top executives at the failed banks.
Brown also asked the regulators to "identify and close regulatory gaps, shortfalls, or failures by state or federal regulators that contributed to the banks' failures." He did not ask for the names of individual Fed or FDIC officials involved in supervising the banks.
— CNBC's Chelsey Cox contributed reporting.