Mark Warner Calls Out Senate GOP: ‘Behavior Has Got To Change’ Towards Fed Vice Chair Michael Barr

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On Thursday, Sen. Mark Warner (D-VA) delivered remarks on GOP Senator behavior during a Senate Banking Committee Hearing.

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Transcript

00:00Thank you.

00:01Thank you, Mr. Chairman.

00:02Thank you, Mr. Chairman.

00:03Senator Warner from Virginia is recognized.

00:06Thank you, Mr. Chairman.

00:07Mr. Bloomberg, I'm not going to echo what all my comments of my colleagues have said.

00:13Behavior's got to change.

00:15It needs to be a meaningful plan, and I think some of us have withheld full comments or

00:21full calls the way some of my colleagues have, but the plan has to be real and credible.

00:26So far, we've not seen that.

00:28I also want to build, Mr. Barr, on somewhat where Senator Rounds is going.

00:36I've written you separately on the Basel III Accord.

00:39I think the reason why there's been such pushback is that, at least early on, there was not

00:46kind of the evidence-based documentation of what would be the cumulative effect of these

00:51rules, these rule changes, particularly in terms of credit availability.

00:56So I hope, before the final rules come out, you would make those estimates public.

01:04I think, again, echoing what Senator Rounds says, we need that from an oversight standpoint,

01:09and I do hope, again, that there will be an evidence-based indication of the risks and

01:15benefits of these proposed rules.

01:17I know you're going through a reworking process.

01:19I know it's probably caused lots of consternation.

01:24I've talked to you and Marty and others about this, but we need, wherever you come down,

01:29we're going to need that evidence-based approach, and I don't think in the initial rule proposal

01:34it was there.

01:35I want to actually, and this is going to be mostly directed at Mr. Hsu, since I had from

01:39Mr. Barr and Mr. Bloomberg, I asked this the last time.

01:44I think one of the things, as we deal with thinking about a rule structure for our banks,

01:52particularly around liquidity problems, the way we saw with SVB, really taught us that

02:00the whole notion of stability deposits and the notion of internet-based runs, that we're

02:06way behind where technology has taken us.

02:10Obviously, we need to make sure that we have ability to prevent temporary liquidity issues

02:19from turning into solvency crises.

02:23One of the things that has bothered me, and I've shared this with all of you, I've shared

02:26with my colleagues on the committee, is the whole beginning of the Fed, the discount window

02:31was set up exactly for this circumstance, but what we've seen is, at least recently,

02:37it's very rarely played that role.

02:41I say this to my colleagues on both sides, I'm going to be soon introducing a bill, and

02:44I've been talking to some of my Republican colleagues, and welcome my Democratic colleagues

02:49as well, to reform the discount window, to fight the so-called stigma that goes about

02:55utilization if you use it.

02:57I think this really ought to be, back to the beginnings of the Fed, a more often used tool.

03:04Now, the bill will implement a mandatory discount window, test borrowing with different tiers

03:11and exemption for those institutions under a billion dollars in assets, and again, other

03:17safeguards to make sure we don't put too much undue burdens on small depositories.

03:23But it will also require that institutions demonstrate that they can use the window.

03:28The SVB didn't even have procedures set up.

03:32And then give regulators, allow them to give proper credit in liquidity evaluations for

03:38institutions that do that.

03:41I think we need to look at how we keep the liquidity window open at a longer basis, and

03:48I'm wide open on how we can do other things to try to remove the stigma issue, and what

03:54the legislation will also try to do, promote a more harmonized process across the Federal

03:59Reserve banks, and better coordination between the Fed and the home loan bank boards, again,

04:05to make sure that we can get this right.

04:07I got your colleagues' comments on this.

04:12We've had a private conversation on this, but I would like you to share whether you

04:17think this kind of approach, in terms of making the liquidity window, de-stigmatizing it,

04:23making sure institutions know how to use it, and modernizing it, would be a step in the

04:29right direction.

04:30Absolutely.

04:31You know, I think it helps to step back and remember what the problem we're trying to

04:37solve is, which is that bank runs are faster.

04:41Because bank runs are faster, that ability to be able to use the discount window when

04:45a bank has appropriate amounts of collateral to be able to do so in a safe and sound manner

04:50is critical.

04:51So all the steps you laid out, we are happy to continue engaging with you as to how to

04:56frame that so it's effective.

04:58It is tricky.

04:59It's a tricky problem to solve, but we're committed to working with you to solve this

05:04problem because we do need to solve this if we're going to address the speed of bank runs.

05:07I don't know how much time has expired, but I would invite any of my colleagues to join

05:11me on this.

05:12I think before we start adding new regs and rules, we ought to make sure some of the tools

05:17that were set up in the first place are more fully used.

05:19Thank you, Mr. Chairman.

05:20Senator Kennedy of Louisiana is recognized.

05:28I hope Senator Al Franken is watching today.

Mark Warner Calls Out Senate GOP: ‘Behavior Has Got To Change’ Towards Fed Vice Chair Michael Barr

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