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Veteran columnist Joe Nocera says the best way forward for the banking sector is to regulate, regulate, regulate. Nocera joined Julie Hyman and Brad Smith on Yahoo! Finance Live as the Senate's hearing on banking turmoil was underway. He says he was "stunned" by Fed Vice Chair Michael Barr's testimony statement, which says "it is not the job of supervisors to fix the issues identified; it is the job of the bank's senior management and board of directors to fix its problems." The problems present in the banking sector should be addressed, Nocera says, by bringing back the "sensible regulations" originally imposed in the wake of the 2008 financial crisis. Specifically, Nocera mentioned bringing back the stress test for banks, originally introduced under the Dodd-Frank act. The stress test serves as a barometer of how well prepared a bank is to weather uncertain economic conditions. A covered institution must run stress tests on a regular basis, to prove they have sufficient capital to keep afloat under stressful circumstances. Under the Trump Administration, stress test requirements were relaxed significantly; the minimum threshold for banks was raised to $250 billion, and the frequency of tests was reduced across the sector. This allowed smaller banks - like SVB - to slide under the radar. "I think a lot of these problems could have been avoided" had regulations been in place, Nocera says. Key Video Moments: 00:00:25 Bring back the stress test 00:00:36 Reimpose regulations from 2008 00:00:50 Problems could've been avoided if proper regulations had been in place To listen to our full conversation with Joe Nocera, click here.
Members of the Senate Banking Committee gathered on Capitol Hill Tuesday to discuss the failures of Silicon Valley Bank and Signature Bank as well as the response of federal regulators. Top officials from the Federal Deposit Insurance Corporation, the Treasury and the Federal Reserve gave testimony defending their response to the two banks' collapse. In an interview with Yahoo Finance's Julie Hyman and Brad Smith, Senator Tina Smith (D-MN) said though the banking system is sound, the failure of SVB and Signature bank is cause for grave concern, noting that additional stress tests for regional banks, more rigid bank supervision and higher capital requirements will be needed to prevent risky bank investments from impacting the financial system to this extent. "I am not one who believes we should have a one size fits all approach... However, the collapse of Silicon Valley Bank shows us that even if you're not designated as systemically significant, you still can have a very powerful impact on the overall stability of the financial system," said Sen. Smith. Key video moments: 00:00:42 Sen. Smith's reaction to the actions taken by federal regulators 00:02:30 Sen. Smith on Congress rolling back bank regulations in 2008 00:05:44 Sen. Smith on bank exposure to crypto Watch our full conversation with Sen. Tina Smith (D-MN) here.
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