Although there is movement in the correct direction, it is going to take a few months for the public to realize there is no further threat for other banks to collapse in the aftermath of what happened to Silicon Valley Bank, Sen. Mike Rounds told NBC News' "Meet The Press" on Sunday.
The South Dakota Republican, who is a member of the Senate Committee on Banking, Housing, and Urban Affairs, said he agreed with what "the Fed did and the Treasury did over the weekend to stop the bleeding, so to speak, on the immediate aftermath. But longer-term I think a lot of our regional banks and the smaller banks in particular are going to want some reassurances that they're going be able to compete with the big ones, the big five. And so I think it's going to take a couple of months for consumers outside to recognize that all of these banks are stable."
When asked if it is OK for the government to allow a bank to fail, Rounds said, "It's one thing to say, 'It's OK to allow the owners of a bank to lose their resources.' It's another thing to say that 'the depositors should necessarily be allowed to lose their deposits.' That's the reason why we begin with a quarter of a million dollars in protection. Perhaps that's not enough."
Rounds added that the real question and what investigators should focus on is: "Why didn't the managers at SVB take advantage of a lot of the tools that were available to spread the risk out? Why did they use interest rate swaps for a period of time, and then basically for the year previous to their failure they quit using them? And why did they not have a chief risk officer in place from April until December?"
Rounds, who is also a member of the Senate Committee on Armed Services, commented as well on Florida Gov. Ron DeSantis' statement that Ukraine is not a vital interest of the United States and that its war with Russia is a territorial dispute.
The senator said the issues at stake are far bigger than a territorial dispute.
Rounds said, "When we pulled out of Afghanistan the way that we did that sent a message to both [Chinese leader] Xi Jinping and to [Russian President Vladimir] Putin that we were withdrawing from the international scene and that maybe they could test the waters about whether or not we would actually exercise our capabilities internationally in the future."
The senator added, "Putin now tests the waters by walking in or attempting to take over a sovereign state right next to them that we had back in 1995 agreed that they would have sovereignty over that specific part of the land. Well, Xi Jinping looks at that and says, 'I'm going to watch this very carefull,' because Xi Jinping would like Taiwan. And he's already committed that one way or another he's going to get it back. He wants to see how we respond and whether or not we can keep our allies together, whether or not NATO stays together, or whether or not it strengthens NATO. So this is a bigger picture than just territory."
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