Fed staff knew SVB was vulnerable but failed to act, report finds

Key points

• Starling Advisory Group's preliminary report states Fed supervisors knew or should have known about SVB's risks by March 2022 but failed to take prompt action.
• Bowman cited a 'culture of risk aversion' and lack of decision-making clarity as reasons for the supervisory inaction.
• The report found SVB's deposits were 94% uninsured and concentrated in venture capital-backed technology companies.
• The review dismisses the theory that social media rumors triggered or accelerated the bank run, according to a sub-analysis by Charles River Associates.
• The report does not name Michael Barr, but the White House has blamed him for the failure, while Democrats argue the review is a partisan tool to exonerate current leadership.
• Bowman has already begun reducing the Fed's supervision division by 30%, with a dozen senior staff leaving by early September.

Background

Silicon Valley Bank collapsed in March 2023 after a rapid run on deposits, becoming the second-largest bank failure in US history. The bank's large holdings of US Treasuries lost value as the Federal Reserve raised interest rates, and its customer base was heavily concentrated in tech startups and venture capital firms. In the aftermath, Fed, FDIC, and Treasury officials guaranteed all deposits, including those above the $250,000 insurance limit. Barr, who was the Fed's top bank regulator at the time, conducted an internal review in 2023 that found the Fed's response was overcautious and attributed the issue to a 2018 regulatory rollback. Bowman, who replaced Barr in 2025, commissioned the new Starling review to reassess the episode.

How outlets are covering it

CNBC and CNN both report that the Starling Advisory Group found Fed staff knew or should have known about SVB's vulnerabilities but failed to act. CNN adds that Bowman cited a 'culture of risk aversion' and 'lack of clarity' in decision-making as key factors, and that the report dismisses the role of social media in the bank run. CNBC notes that the White House has used the report to criticize Barr, while CNN reports that three former Fed officials believe Trump could use the findings to push Barr off the board. Yahoo Finance's coverage is largely obscured by technical errors and does not provide substantive details beyond the headline. All sources agree that the report does not name Barr but attributes the failures to supervisory staff. Democrats, including Sen. Elizabeth Warren, argue the review is a partisan effort to justify deregulation, while the White House and Bowman frame it as a necessary lesson to prevent future failures.

Why it matters

The report highlights systemic weaknesses in the Federal Reserve's supervisory culture and could influence future regulatory policies. If used to push Barr off the board, it could reshape the Fed's leadership and its approach to bank oversight. The findings also raise questions about the effectiveness of the 2018 regulatory rollback and the Fed's response to emerging risks in the banking sector. As Bowman continues to overhaul the Fed's supervision division, the report may serve as a justification for further deregulation or structural changes, with potential implications for financial stability and the safety of bank deposits.

What to watch

The full Starling Advisory Group report has not been released, and it is unclear when or if it will be made public. Bowman has not indicated whether the Fed will release the full findings. The political fallout may lead to further scrutiny of Barr's role and potential efforts to remove him from the Fed board, though no immediate action has been taken. Bowman's ongoing overhaul of the Fed's supervision division, including a 30% reduction in staff, may continue, with potential implications for the regulatory framework and the Fed's approach to bank oversight.