WASHINGTON — President Joe Biden called for regulators and Congress to address issues in the banking system highlighted by the
Biden, in remarks in the White House's Rose Garden on Monday, sought to cast the deal struck by the Federal Deposit Insurance Corp. and JP Morgan for First Republic as anything but a bailout. At the same time, he asked Congress and regulators to reconsider some of the rules that govern large and midsized banks.
"Let me be very clear, all depositors are being protected, shareholders are losing their investment. Critically, taxpayers are not the ones on the hook," Biden said. "Going forward, I've called on Congress to give regulators the tools to hold banking executives accountable."
The Biden administration has also sought to reassure the industry and the public that First Republic's failure is the tail-end of troubles in the midsized banking sector.
According to a person familiar with the matter, Treasury Secretary Yellen and other Treasury officials were in touch with regulators throughout the weekend as the auction for First Republic developed. First Republic was an outlier in the regional bank sector, the person said, and deposit flows at other regional banks have stabilized.
On the other side of the aisle, Republicans in Congress have pushed back on the idea that new regulations or rules are needed.
Rep. Patrick McHenry, R-N.C, the chairman of the House Financial Services Committee, said in a statement that the Biden administration and regulators should "not politicize these events." He also criticized the lack of a similar solution for Silicon Valley Bank, the first large regional bank to fail in this year's banking sector turmoil.
"The FDIC used its available tools to resolve First Republic Bank," McHenry said in a statement. "I appreciate the quick work of regulators to facilitate a sale of the bank's assets, while minimizing risk to taxpayers. The question remains, why didn't the FDIC do the same thing in March when SVB was placed into receivership."
Senate Banking ranking member Tim Scott, R-S.C, reiterated his preference for a private-sector solution for failed banks, in what's likely to be an increasing point of contention for Republicans against the FDIC in its bidding process for Silicon Valley Bank and Signature Bank, which both received systemic risk exceptions from regulators.
"I've long expressed concerns over broad, taxpayer-funded government intervention, so I'm glad the FDIC heeded my concerns and secured a private market solution for First Republic," Scott said.
Democratic lawmakers, meanwhile, re-upped their push for further regulation, including strengthened resolution requirements for midsized banks.
"The failure of First Republic Bank shows how deregulation has made the too big to fail problem even worse,"
Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, revived calls for legislation to
"First Republic Bank's risky behavior, unique business model, and management failures led to significant problems, and it's clear we need stronger guardrails in place," Brown said in a statement. "We must make large banks more resilient against failure so that we protect financial stability and ensure competition in the long run. I will keep working to protect Americans' money, strengthen supervision and oversight of the largest banks, and hold irresponsible bank executives accountable."
