Sens. Warren, Reed urge Treasury's OFR use 'all its tools' after SVB failure

Jennifer Schonberger
·Senior Reporter
Updated ·2-min read

Democratic Sens. Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.) sent a letter Tuesday to the Treasury Department's Office of Financial Research (OFR) expressing concern about the office's failure to use its authority to safeguard the financial system in the wake of last month's bank failures.

"As OFR identifies ongoing and emerging sources of risk where regulators lack visibility, we urge the OFR to take additional steps to fill these data gaps," the senators wrote in a letter obtained exclusively by Yahoo Finance.

"Recent turmoil in the banking system following the failures of Silicon Valley Bank and Signature Bank, which forced financial regulators to take extraordinary action to stem contagion, underscores the need for OFR to use all its tools to live up to its mission and help keep our financial system safe."

Last month, Treasury Secretary Janet Yellen, with a unanimous recommendation from the Fed and the FDIC, approved systemic risk exceptions for the failures of SVB and Signature, enabling the FDIC to guarantee all of the deposits of both banks given that it appeared that contagion from SVB's failure could be far-reaching and cause damage to the broader banking system.

The senators sent their letter ahead of economist Ron Borzekowski's nomination hearing Tuesday before the Senate Banking Committee to serve as director of the OFR.

Sen. Elizabeth Warren, D-Mass., speaks as Federal Reserve Chairman Jerome Powell testifies during a Senate Banking Committee hearing on Capitol Hill in Washington, Tuesday, March 7, 2023. (AP Photo/Andrew Harnik)
Sen. Elizabeth Warren, D-Mass., speaks as Federal Reserve Chairman Jerome Powell testifies during a Senate Banking Committee hearing on Capitol Hill in Washington, Tuesday, March 7, 2023. (AP Photo/Andrew Harnik)

The OFR supports the Financial Stability Oversight Council (FSOC) and was created as part of the Dodd-Frank Wall Street Reform Act to collect data, identify risks for FSOC, and fill blind spots for regulators across the financial system.

Senator Warren first wrote the OFR last January in response to its 2021 annual report, urging the agency to use its tools to address data gaps for risks posed by climate change, cryptocurrencies, and repo markets.

In Tuesday's letter, the senators are requesting answers to questions concerning specific risks identified in OFR's 2022 Annual Report, including decentralized finance and the risk of runs on stablecoins.

The senators want to know whether OFR has collected data on assets held by stablecoin issuers or crypto asset lenders, and if OFR has used its authority to require stablecoin issuers or crypto asset lenders to provide reporting on their assets.

Warren and Reed are also inquiring about how OFR plans to conduct due diligence on the exposures traditional financial markets have to crypto assets.

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