Why isn’t the Federal Reserve requiring banks to hold depositors’ cash?
CointelegraphMar 15, 2023
Following the collapses of Silicon Valley Bank and Signature Bank, US Sens. Rick Scott (R-Fla.) and Elizabeth Warren (D-Mass.) proposed a bill Wednesday to replace the US Federal Reserve's (Fed) internal watchdog with one appointed by the president.
The bill would require an independent inspector general (IG) — appointed by the president and confirmed by the Senate — to oversee both the Federal Reserve Board of Governors and the Consumer Financial Protection Bureau (CFPB).
The Fed, under both Democrat and Republican leadership, seems to have turned a blind eye to the failures of the banks it's supposed to keep in check. Since March 2020, it has not required these banks to hold depositors' cash, which is a key factor in why the two institutions failed so miserably. This is a bipartisan issue that should be fixed by all elected representatives who care about maintaining a safe and ethical financial system that prioritizes consumer protection. Appointing an independent watchdog is a step in the right direction.
While the Fed isn't faultless in this crisis, there needs to be a focus on the banking executives who carelessly caused panic among investors and depositors, resulting in the subsequent run on the two banks. These executives, who knew they would get bailed out, abruptly told the world that they were short on cash without securing a plan to solve it first. Those responsible for such negligence are the ones who should be held to account.