The Fed was heavily criticized for missing red flags before the bank collapsed


WASHINGTON (AP) – The Federal Reserve is facing harsh criticism for what observers say is a Silicon Valley bank that missed clear signs that the risk of a recession was high amid the second-largest bank failure in the state’s history. – United.

The Fed was the lead federal supervisor of the Santa Clara, Calif.-based bank that filed for bankruptcy last week. The bank is also being monitored by the California Department of Financial Protection and Innovation.

Critics point to many red flags surrounding the Silicon Valley bank, including its rapid post-pandemic growth, unusually high levels of uninsured deposits and its large investments in long-term government bonds and mortgage-backed securities. its value decreased as interest rates rose. .

“It is inexplicable that Federal Reserve regulators failed to see this obvious threat to the safety and soundness of banks and financial stability,” said Dennis Kelleher, chief executive of Better Markets, an advocacy group.

Wall Street traders and industry analysts “have been clamoring openly about these same issues for many months since last fall,” Kelleher added.

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