The postmortem report of Silicon Valley Bank is expected to be released by the Fed

The New York Stock Exchange Shutdown: “Banks To Get Kinder, Gentler Treatment Under Trump Regulators,” said First Republic CFO Neal Holland

On Tuesday and Wednesday the New York Stock Exchange halted trading of the bank’s stock because it was so volatile.

In a statement, CFO Neal Holland called those deposit outflows “unprecedented.” Credit Suisse bank analyst Susan Roth Katzke said they “have seriously impaired the earnings power of First Republic.”

“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” those firms said, in a statement. The health and functioning of our financial system is dependent on regional, small and mid-sized banks.

Signature Bank in New York was shuttered two days after Silicon Valley Bank. The FDIC is due to examine whether there were any issues with how it supervised the East Coast lender.

The resilience of the banking system was demonstrated by the show of support by a group of large banks.

On Monday, First Republic said deposits stabilized shortly after the announcement, but investors continued to worry about the bank’s longterm viability.

The Federal Reserve plans to release a report on Friday on whether it missed any red flags in the oversight of Silicon Valley Bank.

The sudden implosion of two big regional banks rattled nerves throughout the financial system last month, forcing the federal government to take emergency steps to prevent a nationwide bank run.

The Federal Reserve made warnings about the risk management practices at Silicon Valley Bank but it wasn’t fixed.

“We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” said Barr, in announcing the Fed’s internal audit of what happened at Silicon Valley Bank.

Dennis Kelleher, who heads the watchdog group Better Markets, blames a deregulatory push in recent years that promoted a light touch on bank oversight.

“The Wall Street Journal had a big headline in 2018 that said, ‘Banks To Get Kinder, Gentler Treatment Under Trump Regulators,'” Kelleher said. The story was about the Fed people beating up on the supervisors in Washington so they wouldn’t go easy on the bankers.

The report is expected to include discussions on whether mid-sized banks should be subject to more frequent stress tests.

The only banks that have to undergo stress tests are those with $250 billion in assets. Silicon Valley Bank was spared the additional scrutiny because of the raised threshold.

Both banks had a large share of deposits that exceeded the usual FDIC insurance limit of $250,000 — putting them at high risk of rapid withdrawals if customers got spooked.

In the days following the banks’ failure, other small banks saw a record outflow of deposits totaling $119 billion. Most banks have seen deposits stabilizing since then, butlenders are more cautious about extending credit.

The Impact of the SBB and Signature Failures on the Stability of the U.S. Small and Medium-Sized Mortgage Rates and the Implications for Credit Markets

That caution, along with higher interest rates, creates an additional drag on economic growth, and it’s leading to a growing risk of a recession later this year.

“Every borrower across the country — small, medium and large — is going to find it much more difficult and much more expensive to get credit,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. The economy will be weaker than it likely would have been if the SBB and Signature failures had not happened.