Transcript: Rep. Patrick McHenry on
The following is a transcript of an interview with Rep. Patrick McHenry, Republican of North Carolina, that aired on “Face the Nation” on Sunday, March 19, 2023.
MARGARET BRENNAN: Joining us now is the chairman of the House Financial Services Committee, Congressman Patrick McHenry of North Carolina. Good morning. Nice to see you here in person.
Representative. Patrick McNary: It’s great to be here.
MARGARET BRENNAN: I want to get into the banking crisis, but first I want to ask you a little bit of business about what Speaker McCarthy said. He is directing Congress to investigate, he tweeted, whether federal funds are being used by the state of New York, where a grand jury could soon indict the 45th president. Why is he making this threat? And aren’t these kinds of congressional investigations simply using American taxpayers’ federal funds for political work?
Representative. McNary: Well, I haven’t had a chance to talk to Speaker McCarthy overnight since that tweet, nor Chairman Comer of the Oversight Investigations Committee, nor Chairman Jordan of the Judiciary Committee. I’m the chair of the House Financial Services Committee, I’ve been caught up in some of the turmoil in the banking sector–
MARGARET BRENNAN: But you’re one of the leading Republicans, I mean, do you agree that federal money is being used on state investigations or are you skeptical? I mean, what about it?
Representative. McNary: The question here — the question here and I think the viable question for the American people is whether or not you have a progressive prosecutor who uses the justice system to use political enemies for political extortion. And that seems to be the case here with the Manhattan DA, but like I said, I’ve spent most of my time on what’s at hand–
Margaret Brennan: Do you think this is a good use of taxpayers’ money?
Representative. McNary: Well I think it’s a questionable use of taxpayer money to allow a prosecutor to use the justice system to go after somebody.
Margaret Brennan: It’s a problem for New Yorkers, isn’t it?
Representative. McNARY: Well, but it’s becoming — it’s becoming a problem for Americans when you see people being targeted — and that’s why Speaker McCarthy has brought up government weaponization within the Judiciary Committee. A committee was formed. And that’s why Jim Jordan is leading the effort.
MARGARET BRENNAN: But now you’re trying to focus on things that are at the level of the crisis in the banking sector. Should one of the ‘too big to fail’ banks, the systemically important banks, step in and buy a troubled bank like First Republic?
Representative. McNary: I think all options should be on the table. That is what I am considering legislatively, I will encourage the administration to consider this as well. There are many things-
Margaret Brennan: Is there anything that would stop this kind of white knight rescue?
Representative. McNary: Well, we’ve got to get to the bottom of it. Right now I think it’s important that the American people have confidence in the financial system and their bank, and I think it’s important right now. That’s why I supported the FDIC and feds-Treasury decision last Sunday night. I thought it was important for the country. Now, I need to get to the bottom of the investigation in Congress, the who, what, when, where, why, and how of these bank failures and decisions over–
Margaret Brennan: Signature and Silicon Valley?
Representative. McNary: That’s right. And then, over the- and the decision was made at the end of the week. We saw the response of the private sector to help the bank. Was this a viable option last weekend? Or was there an ideological lens that prevented them from taking these institutions and making them less tumultuous for America?
MARGARET BRENNAN: That’s why I was asking the question that I asked you, because what you’re suggesting there is that the Biden administration didn’t want a big bank to come to the rescue —
Representative. McNary: We don’t know that.
MARGARET BRENNAN: And now we’re in a continuing crisis. You don’t have the answer-
Representative. MCHENRY: I don’t have the facts as to whether or not the FDIC had a viable buyer late last week. We have press reports from a couple of banks that were on the table. We have comments from other bankers, they were blocked from bidding. I don’t have the facts, and until I have the facts, I won’t draw any conclusions, especially at a moment like this–
MARGARET BRENNAN: But you’re suggesting it could make things worse.
Representative. McNary: Well, I think we know that we had a very difficult week for American banking, and we lost confidence. And—and I think—it raises the question of what happened last weekend.
MARGARET BRENNAN: Well, with what’s going on right now, should a ‘too big to fail’ bank be able to buy one of these banks like First Republic to—bleeding?
Representative. MCHENRY: All options should be on the table.
MARGARET BRENNAN: You heard Senator Elizabeth Warren suggest that she would support a congressional measure to lift insurance on currently uninsured deposits, which are over $250,000. He put a cap of two to $10 million. How long? how big Who does it apply to? How do you prepare it? Do you see an opportunity to work here?
Representative. McNary: Well, that’s the first time I’ve heard such a suggestion. And I haven’t had a single conversation with the White House or the administration about changing the deposit insurance, levels. What I will do as a legislator, and in an oversight role, is to determine whether or not we need to address the FDIC deposit level. We increased it from $100,000 to $250,000 after the last financial crisis. We had a temporary program, post-financial crisis deposit support, to make sure people had confidence in their local bank. What I want to know is the trade off, the moral hazard of taking too much risk in the financial sector, and its impact on community banks. We have fewer community banks now than we have in generations. This is a critical issue for competition in the financial services arena.
Margaret Brennan: The area where we’re seeing pressure right now is mid-sized, though, not community banks.
Representative. MCHENRY: Yes, and these mid-sized banks have regulatory capital requirements, significant capital requirements, which puts them on par with their peers. We have to look at that too.
MARGARET BRENNAN: In this divided Washington, is there anything that can actually pass, other than claws, which I understand are very popular on both sides of the aisle?
Representative. McNary: Well, look, what we do know is that in a bank failure in America the depositors are wiped out, the bondholders are wiped out, the stockholders are wiped out, and the executives are wiped out. is, therefore, to step back–
MARGARET BRENNAN: Well, nobody wants to use the term government bailout, I understand.
Representative. McNary: Well–
MARGARET BRENNAN: But we’re in the midst of an ongoing, possibly spiraling crisis. Can something like FDIC insurance really pass now, lifting that cap,
Representative. McNary: It’s—all options have to be on the table, and that’s how I’m approaching it. But if we do that, we have to understand their trade-offs. It is not a pure play of allowing a large set of insurance coverage. This imposes considerable costs on the financial system and especially on community banks. We need to look at this very carefully. But stepping back, the question of what the FDIC did to backstop the deposits of these two institutions is in the nature of the law we enacted 90 years ago to create the FDIC Fund. It’s a mutual insurance fund, and the industry pays for it, not the taxpayers, and I think they did the right thing.
MARGARET BRENNAN: You’re calling the vice chair for oversight from the head of the FDIC and the Fed’s board of governors. What is your intention? And would you call Mary Daly, head of the San Francisco Federal Reserve?
Representative. McNary: Well, first of all, the heads of these agencies, the vice chair for supervision at the Fed, and the chair of the FDIC, we need to understand the decisions that were made last weekend, Thursday through Sunday night. Whether or not there is a viable private sector solution. We also need to understand the root causes of these bank failures, and we’re going to get to that. The San Francisco Fed question is a surveillance question. We need to get to the bottom of whether this is a supervisory problem, a regulatory problem, a bank mismanagement problem, perhaps all three – in all honesty.
MARGARET BRENNAN: I want to ask you about some of the things that are being said, the populist politics around banking that everyone is involved in —
Representative. McNary: It never ends.
Margaret Brennan: It never ends. But the two banks that failed, they were in New York, and they were in California. Conservatives like Mike Pence, Ron DeSantis, Donald Trump, your colleague James Comer, they’re throwing around terms like ‘waking up the banks pushing the liberal agenda.’ They are blaming diversity and environmental initiatives. Is there no danger in putting a very significant, active crisis in terms of the culture war?
Representative. McNary: I think everyone is preaching their own book. And this is what we heard in your first part–
Margaret Brennan: Well, but, you agree that’s not helpful.
Representative. MCHENRY: Preaching his book. And their book is, well, if they think this was a problem a month ago, they apply it to this situation. This is happening on both sides of the aisle. But when it comes to ESG, and these initiatives, my colleagues–
Margaret Brennan: Environmental Initiatives–
Representative. Mechanisms: Social and Governance–
Margaret Brennan: Right, and encouraging companies to take that into account with their investments.
Representative. McNary: Yes. So there’s — there’s been a lot of political debate about that. Here is the substance. And if the management of these institutions was more concerned with politics, or environmental or social goods than with governance regulations, making sure you had a competent board, you had proper oversight of people’s reserves, So it shows that there was mismanagement among them. So, I think we have natural questions-
MARGARET BRENNAN: But, do you have evidence that—I mean, there was absolutely no risk officer at Silicon Valley Bank for a long period of time.
Representative. McNary: Yes, and you had very few people with banking expertise on the board of the bank. So there are some questions, natural questions we should raise–
MARGARET BRENNAN: But, it’s bad—it’s bad management, it’s not ‘whack banking,’ whatever that means.
Representative. McNary: But as I said, a month ago, a year ago, whatever book you had as a politician, it applies to this general situation. What I’m trying to do is get the details of what happened and what happened, and then determine whether or not there is an appropriate legislative response. But when–when you have a hammer, you see the world like a nail, and that’s what we see with politicians. I’m trying to be substantive and focus on the issues at hand and making sure we get the issues resolved.
Margaret Brennan: Yes. So, as President Biden has asked Congress so far, he may have asked for other things. The only thing he has asked for so far is to claw back their salaries, or pay the executives of the failed banks, and then ban them from working in the financial industry. It already exists for major banks. Senator Warren supports it. Does it pass Congress?
Representative. McNary: Well, that’s something I’m going to look at—look and consider.
Margaret Brennan: But it doesn’t have to be an active crisis.
Representative. McNary: No, it doesn’t. But in response to these things we know that they seem to be his failure. We have seen, for example, that deposits perform differently than regulators expect, with uninsured deposits leaving at a faster rate than insured deposits. This is a new trend. When we have Twitter and the speed of running banks, and the speed of electronic banking, those are things that we need to look at legislatively and regulatoryly. The question of performance of bank executives, we definitely need to look at it and ensure that they are aligned with the interests of the customers and depositors.
MARGARET BRENNAN: Congressman, we’ll be watching your upcoming hearing. Thank you, the face of the nation will be back in a minute. stay with us