Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. Two weeks after the collapse of Silicon Valley Bank and Signature Bank sent the financial sector into a tailspin, Washington lawmakers will finally get a forum to publicly grill top regulators on what went wrong and what needs to be done to prevent more fubar. Federal Reserve Vice Chair for Supervision Michael Barr, FDIC Chair Martin Gruenberg and Treasury Under Secretary for Domestic Finance Nellie Liang will testify at a pair of hearings — Senate Banking on Tuesday and House Financial Services on Wednesday — on the Biden administration’s response to market-rattling bank runs that have shaken the public’s faith in regional banks. That response remains a concern. Banks are leaning on the Fed’s newly christened emergency borrowing program to address their funding needs. Late Sunday, the FDIC announced that First Citizens Bank of North Carolina had agreed to assume SVB’s loans and deposits — capping a sales process that had frustrated some lawmakers. More than a week after receiving $30 billion in deposits from major banks, the eventual fate of the San Francisco-based lender First Republic remains uncertain. And clouds are still hovering over major European institutions after Swiss regulators engineered UBS’s takeover of Credit Suisse. With that as a backdrop, congressional leaders have spent the last two weeks trying to stake out positions on a sprawling policy battle over the future of banking regulation. While that fight may not yield legislation in a divided Congress, the hearings will offer the sharpest indication where lawmakers stand on key issues like deposit insurance, bank supervision and capital requirements. Here’s what we’ll be watching for during the hearings this week: — Deposit Insurance: Senate Banking Chair Sherrod Brown (D-Ohio) said last week that changes to deposit insurance, including raising the $250,000 cap to help businesses address issues like payroll in the event of a bank failure, could get bipartisan support. Any sweeping alterations to the FDIC would be politically fraught — as Zach covered last week — but it will be important to keep an eye on which lawmakers identify tweaks to deposit insurance as potential long-term policy solution. — Bank Supervision: House Financial Services Chair Patrick McHenry (R-N.C.) – along with top deputies like Reps. French Hill (R-Ark.), Andy Barr (R-Ky.) and Bill Huizenga (R-Mich.) — fired off letters last week demanding more information from regulators about the events leading up to SVB and Signature’s collapse. Senate Republicans, led by Tim Scott of South Carolina, are pressuring both the Fed and San Francisco Fed over its supervision of SVB, which was exhibiting warning signs “in the months and years leading up to its closure.” Certain Democrats, including Sen. Elizabeth Warren (D-Mass.), have also knocked banking regulators for failing to do more to prevent SVB’s implosion. While those critiques often come with calls for tighter regulation, moderate Democrats may probe the panel on potential supervisory failures as well. — Capital requirements and tailoring: Speaking of Warren, even though the odds are nil for repealing a 2018 law that rolled back parts of Dodd-Frank, Barr’s vocal opposition to that measure should offer progressive lawmakers an opportunity to hit their talking points on how it eventually contributed to SVB’s downfall. We’re expecting him to face questions on both his “holistic” review of capital requirements and the 2018 changes. IT’S MONDAY — And I’m back at work after a week in France. If you get a chance to visit the World War I museum in Meaux, take it. Send tips, suggestions and gossip to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.
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