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: We are joined now by the Chairman of the House Financial Services Committee, North Carolina Congressman Patrick McHenry. Good morning. Good to have you here in person.
REP. PATRICK MCHENRY: Great to be here.
MARGARET BRENNAN: I want to go into the banking crisis, but I first want to ask you about a bit- bit of business in regard to what Speaker McCarthy has said. He’s directing Congress to investigate, he tweeted, whether federal funds are being used by the state of New York where a grand jury may soon indict the 45th President. Why is he issuing this threat? And it isn’t this kind of congressional investigation just using federal funds from U.S. taxpayers on a political errand?
REP. MCHENRY: Well, I haven’t had an opportunity 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 chair of the House Financial Services Committee, I’ve been caught up in a bit of the turbulence in the banking sector–
MARGARET BRENNAN: But you’re one of the top leading Republicans, I mean, do you agree with federal money being used on a state investigation or casting doubt? I mean, what is it about?
REP. MCHENRY: 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 using the justice system to go after political enemies for political splash. And that seems to be the case here with the Manhattan D.A. But as I said, I’ve spent most of my time focused on what’s at hand–
MARGARET BRENNAN: Do you think it’s a good use of taxpayer money?
REP. MCHENRY: 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: That’s a problem for New Yorkers, isn’t it?
REP. MCHENRY: Right, but it’s becoming- it’s becoming a problem for Americans when you see people targeted in the- and that’s the reason why Speaker McCarthy set up the Weaponization of Government committee for- the within the Judiciary Committee. And that’s the reason why Jim Jordan is leading that- that effort.
MARGARET BRENNAN: But you’re trying now to focus on things of substance that are at crisis level, in the banking sector. Should one of the ‘too big to fail’ banks, the large systemically important banks, be able to step in here and buy up a troubled bank like First Republic?
REP. MCHENRY: I think all options should be on the table. That’s what I’m considering legislatively, that’s what I would encourage the administration to consider as well. There are a lot of things–
MARGARET BRENNAN: Is there anything that would block that kind of white knight rescue?
REP. MCHENRY: Well, that’s what we have to get to the bottom of. At the moment I think it’s important the American people have confidence in the financial system and their bank, and I think that is the imperative right now. That’s the reason why I supported the FDIC and feds- Treasury’s decision last Sunday night. I thought it was an imperative for the country. Now, what I need to get to the bottom of investigatively, in Congress, is the who, what, when, where, why, and how of these bank failures and the decision over–
MARGARET BRENNAN: Signature and Silicon Valley?
REP. MCHENRY: That’s right. And then, over the- and the decision made over the weekend. We saw a private sector response to help support a bank. Was that a viable option last weekend? Or was there an ideological lens that prevented them from taking these institutions and making it less turbulent for America?
MARGARET BRENNAN: That’s why I was asking the question 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 here–
REP. MCHENRY: We don’t know that.
MARGARET BRENNAN: And we’re now in a continued crisis. You don’t have an answer to–
REP. MCHENRY: I don’t have the facts on whether or not the FDIC had a viable buyer last weekend. We have press reports of two- two banks that were at the table. We have comments from other bankers, they were prevented from bidding. I don’t have the facts, and until I have the facts, I’m not going to draw a conclusion, especially in a moment like this–
MARGARET BRENNAN: But you’re suggesting it could have made things worse.
REP. MCHENRY: Well, I think we know we had a very rough week for American banking, and we lost- lost confidence. And- and I think that is- that raises the questions of what happened last weekend.
MARGARET BRENNAN: Well, in terms of what happens right now, should a ‘too big to fail’ bank be able to buy up one of these banks like First Republic to- to stop the bleeding?
REP. MCHENRY: All options should be on the table.
MARGARET BRENNAN: You did hear Senator Elizabeth Warren suggest that she would favor a congressional initiative to lift the insurance on currently uninsured deposits, those above $250,000. She put a cap of two to 10 million dollars. For how long? How big? Who does that apply to? How would you craft that? Do you see a chance to work here?
REP. MCHENRY: Well, it’s the first time I’ve heard a proposal like that. And I have not had a single conversation with the White House or the administration about deposit insurance, changing the levels. What I will do though, legislatively, and in an oversight function is to determine whether or not we need to address the FDIC deposit level. We did it after the last financial crisis raising from $100,000 to $250,000. We had a temporary program, post-financial crisis to support deposits, to ensure that folks had confidence in their local bank. What I want to know is the trade off though, the moral hazard of having more risk taking in the financial sector, and also the impact it would have on community banks. We have far fewer community banks now than we’ve had in generations. That’s a significant problem for competition in the financial services arena.
MARGARET BRENNAN: That area we’re seeing the pressure right now is that mid-size, though, not the community banks.
REP. MCHENRY: Yes, and those mid-sized banks have regulatory capital requirements, significant capital requirements, that put them in similar positions with their peers. We have to look at that as well.
MARGARET BRENNAN: In this divided Washington, is there anything that could actually pass besides the clawbacks, which I assume is very popular on both sides of the aisle?
REP. MCHENRY: Well, look, what we do know is depositors are made whole in America in a bank failure, that bondholders are wiped out, those stockholders are wiped out, and the executives get wiped out, so, stepping back–
MARGARET BRENNAN: Right, no one wants to use the term government bailout, I get that.
REP. MCHENRY: Well–
MARGARET BRENNAN: But we’re in the midst of an ongoing, potentially rolling crisis. Could something like FDIC insurance actually pass right now, lifting that cap,
REP. MCHENRY: It’s- all options should be on the table, and that’s how I’m approaching it. But if we do this, we have to understand their trade-offs. It is not a pure play of allowing a larger set of insurance coverage. It costs the financial system significantly, and especially community banks. We need to look very carefully at this. But stepping back, the question of what the FDIC did to backstop deposits of these two institutions, is in the nature of the law we created 90 years ago to create the FDIC fund. It is a mutual insurance fund, and the industry pays for that, not the taxpayers, and I think they acted appropriately.
MARGARET BRENNAN: You’re calling in the head of the FDIC and the Vice Chair for Supervision from the Fed’s Board of Governors. What is your intent? And will you call up Mary Daly, the head of the San Francisco Federal Reserve?
REP. MCHENRY: Well, first things first, 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, on- from Thursday until Sunday night on whether or not there’s a viable private sector solution. We also need to understand the underlying causes of the collapse of these banks, and we’re going to get to that. The question of the San Francisco Fed is a question of supervision. We need to get to the bottom of whether or not this is a supervisory problem, regulatory problem, a bank mismanagement problem, perhaps all three in all- in all frankness.
MARGARET BRENNAN: I want to ask you about some of the things being said, populist politics around banking everyone engages in–
REP. MCHENRY: It never ends.
MARGARET BRENNAN: It never ends. But the two banks that did fail, 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 ‘woke banks advancing the liberal agenda.’ They’re blaming diversity and environmental initiatives. Isn’t there a danger in casting a very substantive, active crisis, in terms of a culture war?
REP. MCHENRY: I think everyone’s preaching their book. And that’s what we heard in your first segment–
MARGARET BRENNAN: Right, but, you agree that’s not helpful.
REP. MCHENRY: Preaching their book. And their book is, well, if they thought it was a problem a month ago, they apply it to this circumstance. That’s happening on both sides of the aisle. But when it comes to the question of ESG, and these initiatives, my fellow–
MARGARET BRENNAN: Environmental initiatives–
REP. MCHENRY: Social and governance–
MARGARET BRENNAN: Right, and the encouragement of companies to take that into consideration with their investment.
REP. MCHENRY: Yes. So there is- there has been a lot of political debate about that. There is substance here. And if the management of these institutions was much more concerned about politics, or the environmental or social goods, rather than the governance regulations, ensuring you had a capable board, you had proper oversight of people’s deposits, then this shows they had mismanagement. So, I think there there are natural questions that we have–
MARGARET BRENNAN: But, do you have evidence of that, that the- I mean, there wasn’t a risk officer fully at Silicon Valley Bank for an extended period of time.
REP. MCHENRY: Yes and you had very few people that had banking expertise on the board of the bank. So there are some questions, natural questions we should raise–
MARGARET BRENNAN: But, that’s bad- that’s bad management, that’s not ‘woke banking,’ whatever that means.
REP. MCHENRY: But as I said, whatever your book of business was, as a politician a month ago, a year ago, is applied to this general circumstance. What I’m trying to do is get to the details of what happened and have whether- well, and then determine whether or not there’s a proper legislative response. But when- when you have a hammer, you look at the world as a nail, and that’s what we see out of politicians. I’m trying to be of substance and focus on the issues at hand and make sure that we fix the problems.
MARGARET BRENNAN: Yes. So, President Biden has asked Congress so far, maybe he asked for other things. The only thing he’s asked for, so far, is to be able to claw back salaries of those, or pay to executives of failed banks, and then to ban them from working in the financial industry. This already exists for the great big banks. Senator Warren supports that. Does that pass Congress?
REP. MCHENRY: Well, it’s something I’m going to look at- look at and consider.
MARGARET BRENNAN: But it doesn’t have to do the active crisis.
REP. MCHENRY: No, it does- it doesn’t. But in response to these things, we know that they are known failures of this. We saw, for instance, deposits perform in a different way than regulators assumed, that uninsured deposits left at a more rapid rate than the insured deposits. That’s a new phenomenon. When we have the speed of Twitter and a bank run, and the speed of electronic banking, those things are things that we need to look at legislatively and regulatorily. The question of performance of bank executives, we certainly need to look at that and make sure that they are aligned with consumer protection and depositor interest.
MARGARET BRENNAN: Congressman, we will be watching your upcoming hearing. Thank you. Face the Nation will be back in a minute. Stay with us.