Sen. Warren calls for probe into Fed’s outside review of Silicon Valley Bank failure

By Joshua Green and Maria Eloisa Capurro, Bloomberg

Senator Elizabeth Warren is asking the Federal Reserve’s Office of Inspector General to open an investigation into the decision by the central bank’s vice chair for supervision, Michelle Bowman, to commission an outside review of the 2023 failure of Silicon Valley Bank.

In a letter to the IG’s office on Tuesday, Warren, the top Democrat on the Senate Banking Committee, said the review may constitute government “waste,” since previous audits of the failure have already been conducted.

Warren also expressed concern the review may violate Fed policies because the firm conducting it is connected to former Vice Chair for Supervision Randy Quarles, who served as the agency’s top bank cop until 2021 during President Donald Trump’s first term.

That connection “raises serious questions as to whether the Fed’s contract, procurement and conflict of interest policies were followed,” Warren wrote in the letter obtained by Bloomberg News.

“I therefore request that the Office of Inspector General of the Board of Governors of the Federal Reserve System conduct an investigation into this review to determine whether any statutes, regulations, policies, or procedures were violated, and whether the review constitutes government waste,” she wrote.

A spokesperson for the Fed’s IG confirmed receipt of the letter, but declined further comment. The Fed declined to comment.

The Fed in February said the Bowman-commissioned review is aimed at “identifying the shortcomings in our supervision that kept the Federal Reserve from identifying or taking prompt and effective actions to address the deficiencies” that led to the failures of SVB and other lenders in 2023. Warren has taken issue with the review for months, and has previously sent letters to the Fed over the matter.

The new review follows ones conducted by the Fed’s IG, the Government Accountability Office and Fed Governor Michael Barr, Bowman’s predecessor as vice chair for supervision.

The Fed tapped a little-known firm, Starling Trust Sciences, to run the latest audit. Warren in her Tuesday letter said, “It is difficult to believe that the contract was awarded through a truly competitive process, and that a firm publicly affiliated with Mr. Quarles just so happened to be the best applicant.”

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