External Review Finds Fed Staff Knew of Silicon Valley Bank Risks Prior to Collapse

Federal Reserve supervisory staff "knew, or should have known" that Silicon Valley Bank was vulnerable before its March 2023 collapse, according to findings from an independent review announced Friday by Fed Vice Chair for Supervision Michelle Bowman. The review, conducted by consulting firm Starling Advisory Group and disclosed by Bowman during a speech in London, was reported by CNBC Business (https://www.cnbc.com/2026/09/18/fed-silicon-valley-bank.html).

Silicon Valley Bank failed in March 2023 following a rapid bank run triggered when the lender disclosed a $1.8 billion loss on securities sales and sought emergency capital. The bank's portfolio of U.S. Treasurys had dropped in value as the Fed raised interest rates. Bowman said the Starling inquiry found that 94 percent of the bank's deposits were uninsured—exceeding the standard $250,000 Federal Deposit Insurance Corporation threshold—and heavily concentrated in venture capital–backed technology companies. The run prompted joint emergency action by the Fed, the FDIC, and the Treasury Department to guarantee all customer deposits.

The findings immediately escalated political tensions surrounding the central bank. White House spokesman Kush Desai said the report implicated Fed Governor Michael Barr, who served as the Fed's top regulatory official during the 2023 crisis. Desai asserted that Barr mishandled supervision and later issued a self-serving report to deflect blame.

Barr, who was appointed by President Joe Biden in 2022, led an internal Fed inquiry in April 2023 that found bank examiners were overly cautious and cited a 2018 law that tailored and reduced supervisory standards. Starling's review disagreed with that assessment, with Bowman stating that regulatory tailoring mandates did not cause supervisory delays. Although the Starling report attributes oversight failures to supervisory staff rather than naming Barr personally, the findings directly contradict the Fed's 2023 internal review.

Barr stepped down as vice chair for supervision in February 2025, allowing President Donald Trump to nominate Bowman, though Barr remains on the Fed's Board of Governors. Barr told the newsletter Capitol Account in July that he cooperated with Starling's inquiry. The release follows recent comments from Trump calling the Fed's board "hostile" after Fed Chairman Kevin Warsh joined a unanimous vote to raise interest rates, prompting concern among some Fed watchers that the review could be used to pressure Barr off the board.

Bowman has initiated a broader restructuring of the Fed's oversight apparatus, detailing plans to reduce headcount in the supervision and regulation division by approximately 30 percent. Fed staff records indicate a dozen senior staff members departed the division by early September, alongside ongoing staffing changes. Neither the Fed Board of Governors nor Starling Advisory Group indicated when or if the complete review would be published.

The report drew sharp criticism from Senator Elizabeth Warren of Massachusetts, the ranking Democrat on the Senate Banking Committee. Warren called the review a waste of taxpayer money and an effort to rewrite history to justify financial deregulation that could trigger future bank failures.