Fed criticized for missing red flags before bank collapse

The Federal Reserve is facing stinging criticism for missing what observers say were clear signs that Silicon Valley Bank was at a high risk of collapsing into the second-largest bank failure in history of the United States.

Critics point to many red flags surrounding the bank, including its rapid growth since the pandemic, its unusually high level of uninsured deposits and its many investments in long-term government bonds and mortgage-backed securities, which tumbled in value as interest rates rose.

"It's inexplicable how the Federal Reserve supervisors could not see this clear threat to the safety and soundness of banks and to financial stability," said Dennis Kelleher, chief executive of Better Markets, an advocacy group.