As Congress and the White House continue to grapple with the fallout of Silicon Valley Bank’s (SVB) collapse, both parties are united on one thing: Congress must investigate what happened. Following news that regulators seized New York-based Signature Bank on March 12, 2023, President Biden addressed the nation the next morning to reassure consumers and the markets that the broader financial system remains stable. But he also said that “there are important questions of how these banks got into these circumstances in the first place.” He urged a “full accounting of what happened and why those responsible can be held accountable,” saying that “no one is above the law.”1
While officials including Treasury Secretary Janet Yellen have repeatedly emphasized in the last several days that SVB’s failure does not reflect the type of broader instability that brought about the 2008 financial crisis, the congressional response to the 2008 crisis may provide clues about what’s to come on the Hill. In the years after the crisis, bank executives were repeatedly hauled before House and Senate committees and grilled by members of both parties. Large banks and their executives remain broadly unpopular among both Republicans and Democrats across the country, so lawmakers will be eager to show their constituents that they are taking action. Major players involved in the SVB and Signature Bank failures, and potentially other industry actors, will likely be the subject of extensive and high-profile investigations.
Bipartisan Demands for Investigations
Members of Congress have echoed President Biden’s call to hold executives at SVB and Signature Bank accountable. In the Senate, multiple prominent Democrats and Republicans have called for investigations and forceful action:
Senator Warren is part of a growing chorus of Democrats heavily criticizing a 2018 law passed under the Trump administration rolling back some banking regulations put in place in the wake of the 2008 financial crisis and vowing to strengthen regulations on banks.
In the House, at least one committee is already planning its first hearing. Rep. Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, said in an interview that she is already working with Republicans on the Committee to schedule the first hearing on the SVB collapse. Her Republican counterpart, Chairman Patrick McHenry (R-NC), released a statement saying that “it is important to remain levelheaded and look at the facts—not speculation—when assessing the right path forward.”
House Oversight Committee Chairman James Comer (R-KY) has framed SVB’s failure as part of Republicans’ larger narrative against environmental, social, and corporate governance (ESG) policies, claiming in an interview with Fox News that that it was “one of the most woke banks in their quest for the ESG-type policy and investing.”3 Rep. Comer’s attacks on SVB reflect a broader effort within the Republican party to cast SVB, which counted venture capital and tech firms as one of its primary customer bases, as an example of how companies engaged in ESG investing are favoring progressive policies over shareholder value.
Responding to Congressional Inquiries
Given the high-profile nature of SVB’s failure and the political opportunities it presents to highlight failures for both parties, congressional investigations are all but guaranteed and will likely ensnare industry actors beyond SVB and Signature Bank. With President Biden’s call for regulatory scrutiny and action, it is also likely that any subject of congressional investigation will have to contend with investigations on multiple fronts. It is important to have a strong, defensive strategy in place that takes a holistic view of the potential risks facing your company before responding to requests for information, documents, or testimony.
Responding to congressional inquiries requires different strategic considerations from typical white-collar litigation or lobbying, and knowledge of House and Senate rules and practices is important to avoiding critical missteps that could expose firms to undue legal or public relations crises. Please reach out to Wilson Sonsini attorneys Beth George, Jessica Heller, Andy Dockham, Janet Kim, Sean Quinn, or other attorneys in the strategic risk and crisis management practice with any questions about how Wilson Sonsini can assist you. For additional resources and the firm's most up-to-date information related to the closure of Silicon Valley Bank, please visit our Silicon Valley Bank Advisory Information page.
[1]NPR, Biden Reassures Bank Customers and Says the Failed Firms’ Leaders Are Fired (Mar. 13, 2023).
[2]Politico, Hill Lawmakers Are Still Assessing How To Respond To Silicon Valley Bank’s Collapse - With Many Calling for Congressional Investigation (Mar. 13, 2023).
[3]Business Insider, GOP House Oversight Chairman James Comer Criticizes Silicon Valley Bank As “One of the Most Woke Banks” (Mar. 13, 2023).