March 30, 2023

Berger on Bloomberg TV: ‘Something was missed’ in bank failures

Control room shot of Berger on BloombergTVNAFCU President and CEO Dan Berger joined The Close on Bloomberg TV Wednesday to discuss recent bank failures, saying that they were the result of poor management across the board and adding that although the San Francisco Federal Reserve Bank cited Silicon Valley Bank for concerns in recent years, “something was missed in terms of the mitigation.”

Berger told The Close hosts Scarlet Fu and Katie Greifeld that in the aftermath of the failures, there was a “flight to safety” to credit unions and other institutions, but these have started to settle down the farther we get from the collapses.

“The bottom line is the financial system of the United States is resilient and it is strong,” Berger said.

Asked what he expects to see from a regulatory approach to address these issues, Berger said the banking regulators will likely do a deep-dive to determine what went wrong.

“I think Congress needs to be commended because they’re looking to see what actually occurred before passing new laws or promulgating new regulations with prudential regulators. We have got to find out what exactly occurred, what was missed. Clearly there was poor bank management from the asset side as well as the risk side, but clearly the San Francisco Fed missed something in terms of mitigation because it was glaring. You can’t have quadrupling of your uninsured assets in four or five years and not have that be a concentration risk.”

Berger also joined Atlanta news station 11Alive this week to help explain how credit union deposits are insured and reiterate the industry’s safety. During the segment, Berger said that accounts over the $250,000 deposit insurance limit are typically business accounts and added that 91 percent of credit union deposits are federally backed through the NCUA – a point he also reiterated on Bloomberg TV. He previously discussed the strength of the credit union industry on Wharton Business Daily SiriusXM.

Berger’s interviews came amid congressional hearings this week on the bank failures with Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg, Federal Reserve Vice Chair of Supervision Michael Barr, and Treasury Department Undersecretary for Domestic Finance Nellie Liang.

During Wednesday’s hearing before the House Financial Services Committee, lawmakers explored the banks’ mismanagement, why the Fed decided to deem Silicon Valley Bank a systemically important institution, and whether it was deregulation or regulator failure to blame for the failures.

Most of the questioning focused on the timeline of events – including what regulators knew and when – and if they had the proper regulatory tools. Several members spoke about exempting community banks from the assessment the FDIC will need to replenish their deposit insurance fund, which is expected to take a roughly $20 billion hit from covering uninsured deposits at the failed banks.

NAFCU sent the House Financial Services Committee and Senate Banking Committee letters ahead of the hearings outlining points related to deposit insurance, liquidity, and more. The association also sent member credit unions an update on Washington’s response to the failures last week; NAFCU has worked diligently to keep members informed of the situation since it began.

Stay tuned to NAFCU Today for the latest.