"Our banking system is sound and resilient," Mr. Barr told lawmakers in his opening statement — a reassurance that several regulators have made recently, including Treasury Secretary Janet Yellen earlier this month.
Mr. Barr went on to say that SVB failed "because the bank's management did not effectively manage its interest rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors in a period of less than 24 hours."
The Treasury, Fed and FDIC seized SVB on March 10 and Signature Bank on March 12. In a joint statement released March 12, the regulators said all depositors would be protected.
Chairman Sherrod Brown, D-Ohio, asked Mr. Gruenberg what the impact would have been if the regulators had not taken those measures.
"I think there would have been a contagion (to other institutions) and I think we'd be in a worse situation today," Mr. Gruenberg replied.
Ranking Member Tim Scott, R-S.C., was critical of the regulators' actions, however, suggesting that the whole situation "could have been avoided" if a private-sector entity bought out Silicon Valley Bank on March 10. Mr. Gruenberg said the FDIC did not have an acceptable bid at that time.
Republicans on the committee maintained the idea that regulators could have done more to prevent the collapse. Sen. John Kennedy, R-La., pressed Mr. Barr on why the Fed didn't have SVB undergo a stress test — a way of measuring whether a bank can withstand a financial crisis. Mr. Barr said that the Fed's own rules prevented them from stress testing SVB due to its size.
Sen. Elizabeth Warren, D-Mass., asked each individual testifying whether they agree that banking rules need to be strengthened going forward, to which all agreed. While Ms. Warren first blamed the banking executives for their actions, she noted "these collapses also represent a massive failure in supervision over our nation's banks."
Ms. Warren teamed up with Republican Sen. Rick Scott of Florida to introduce legislation last week that would require the Fed's inspector general to be appointed by the president and confirmed by the Senate. In a news release on March 22, Ms. Warren said doing so would "hold Fed officials accountable for any lapses or wrongdoing."
Sen. Catherine Cortez Masto, D-Nev., also questioned the regulators on whether there should be an independent investigation of their agencies to determine any wrongdoing. Mr. Barr said while he thinks it's important for the Fed to do their own review, which he called "a self-assessment," he said the agency would also "expect and welcome independent reviews of our actions."
Mr. Barr said the agency's internal review is expected to wrap up by May 1. All three witnesses are expected to testify before the House Financial Services Committee Wednesday morning.