British Columbia

Unaffordable affordable homes: Rent at some single room occupancy units more than $1,000

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Advocates say rising rent at SROs are creating financial

 barriers for those at risk of homelessness

Joel Ballard · CBC News · Posted: Mar 28, 2023 

The Grand Union Hotel is one of the more than 160 single-resident occupancy buildings in Vancouver. (Ben Nelms/CBC)

Across downtown Vancouver, there are more than 160 single-room occupancy [SRO] buildings that contain small single rooms, usually with a shared kitchen and bathroom facilities.

The rental units serve as part of the city's affordable housing stock, typically offering a cheaper option than market rental apartments.

SRO housing is often seen "as the last stop before homelessness," according to the City of Vancouver's website.

But without any control measures in place, the price of rent at certain privately-owned SROs continues to climb, sometimes reaching more than $1,000 a month, which advocates say is creating financial barriers for the city's most vulnerable population.

$1,300 for a single room

Johnny Loudon has lived with his girlfriend at the Grand Union Hotel, an SRO on Vancouver's Downtown Eastside, for the past two months.

The couple pays $1,300 a month to rent a single room with a couple of shelves and a sink. The building has shared bathrooms and kitchens.

• Vancouver approves pilot project to improve fire safety in SROs

Loudon says he has seen rats, cockroaches, and bed bugs in his unit. He says fights are common, and there are bullet holes in the walls that have been mudded over. In their unit, the couple says they often feel so cold they have to use a space heater.

"It feels disgusting. It feels like a slap in the face considering how much I'm paying," said Loudon.

Johnny Loudon says it took him six years to find a place to live. Before that, he was living between shelters and on the streets. (GP Mendoza/CBC News)

The couple spends most of their welfare and disability income on their rent.

"It's worth it for me and my girlfriend because we just wanted to get off the streets and out of the shelters. It's just too much violence," he said, although he also says he still feels unsafe at the Grand Union.

CBC News reached out to the owner of the Grand Union hotel for an interview but did not get a response.

If he could leave the Downtown Eastside altogether, Loudon says he would but feels stuck in a cycle, unable to escape.

"Being in addiction and not having enough money for a better place because the rent is so high here, it feels like the barriers are insane."

Vulnerable residents 'pushed out': advocate

Loudon's situation is just one example of a larger issue.

A quick search of Facebook Marketplace turned up two different SRO listings offering units for $1,000 a month or more.

In the listing for rooms at the Metro Residences in Strathcona, the suites are being promoted as "all-inclusive micro units."

Some landlords are renting their SRO units on Facebook Marketplace for $1,000 or more a month. (CBC News)

Wendy Pedersen, executive director of the SRO Collaborative, says the average rent for an SRO unit is around $600 a month, but she continues to see some landlords lease suites for more than $1,000 a month while conditions continue to deteriorate. 

And she says fewer and fewer residents of the Downtown Eastside can afford to live in the SROs.

"The problem is, there's no place for these people to go when they get pushed out by rent increases or deteriorating conditions," said Pedersen.

"If people think homelessness is bad now. It's only going to get much worse."

• Province and City of Vancouver announce new housing units in Downtown Eastside

In Vancouver, there are two types of SRO buildings: not-for-profit managed or owned buildings that offer rent at shelter rates of $375 a month and privately owned and managed SROs.

The City of Vancouver says the privately owned and managed SROs are market rentals, meaning landlords can set their own rates and rent the units to whoever is willing to pay, not just low-income individuals.

Pedersen says about 4,000 SRO rooms in Vancouver are privately-owned and that rental stock is shrinking as the units are gentrified and rented at a premium.

City policy attempts to limit rent increases

In 2021, Vancouver's former city council passed the SRA Vacancy Control policy, a bylaw that attempted to ground ballooning rent prices at SROs.

The policy placed limits on how much a landlord could charge between tenancies. But it hit a speed bump after a pair of property owners independently brought lawsuits against the city.

The petitions were heard jointly, and a Supreme Court judge found that the city did not have the authority to set how a property owner changes rent for SROs when a tenant moves out because of conflicts with the provincial Residential Tenancy Act.

The policy is still tied up in the courts as the city has since filed an appeal.

The court's decision was disappointing news to Coun. Christine Boyle, who says more action is needed to protect SRO housing.

She's calling on the provincial and federal governments to work with the city to purchase private SRO buildings to bring them into public ownership.

"We can protect the affordability of those units and then work on a plan that upgrades them over time to build safe, clean, dignified supportive housing," said Boyle.

The city says it has been monitoring rents in the private SRO stock since 1992 through the biennial Low Income Housing Survey. The results of the 2022 Survey have not yet been released. (Ben Nelms/CBC)

The Ministry of Housing declined an interview but said in a statement it is working with the federal government and the City of Vancouver on SRO improvements, either through renovating units into self-contained suites or replacing buildings with better housing options.

"We know SROs are not a long-term housing solution for a majority of people. SROs typically do not offer the standard of housing we want to see in communities in British Columbia," said the ministry.

"At the same time, there is a need to protect affordability in SROs to provide housing for people who are experiencing or at risk of homelessness in Vancouver."

$11 Trillion Investor Group Urges Members Not To Fund New Oil And Gas Projects

By Tsvetana Paraskova - Mar 29, 2023

The Net-Zero Asset Owner Alliance, a group made up of members from the banking, insurance, and investment sectors with $11 trillion of assets under management, called on its members on Wednesday to align their oil and gas policies to a 1.5-degree Celsius pathway, which cannot be achieved if there are new upstream infrastructure investments in new oil and gas fields.

“On private asset investment in new unabated oil and gas infrastructure, investors, including Alliance members, shall align with credible 1.5°C net zero scenarios. This cannot be achieved if there are new upstream infrastructure investments in new oil and gas fields,” the alliance said in a statement.

The alliance, in which 85 major banks and institutional investors are represented, issued a new position on the oil and gas sector today, expecting its member investors to adopt policies that align with these positions on infrastructure investments, or show how existing policies already align.

The investor group also called on oil and gas producers and their customers to set science-based, absolute- and intensity-oriented emissions targets covering Scope 1, 2, and 3 greenhouse emissions that are aligned with 1.5°C or limited overshoot scenarios.

“How energy is provided and consumed must therefore dramatically change. This includes the need to phase out non-renewable sources like oil and gas in many, if not most, of its current uses,” said Günther Thallinger, Allianz SE Board Member and Chair of the Net-Zero Asset Owner Alliance.

Under pressure from ESG trends and shareholders, some banks have announced in recent months tougher rules on the financing of fossil fuels.

ING, for example, is further restricting financing to the oil and gas industry, reducing the volume of traded oil and gas it finances and no longer financing midstream infrastructure for new oil and gas fields, the Netherlands-based bank said earlier this month. Last year, ING said it would aim to grow new financing of renewable energy by 50% by year-end 2025 and would no longer provide dedicated finance to new oil and gas fields.

Barclays has said it will no longer provide financing to oil sands companies or oil sands projects and tightened conditions for thermal coal lending in an updated policy, which fell short of announcing overall pledges or targets in funding oil and gas. 

 British Columbia

Once homeless and hungry herself, this retired nurse set up a low-cost meat shop to help those in need

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Brigida Crosbie sells food at prices all her customers can

 afford — when she's not giving it away

Ali Pitargue · CBC News · Posted: Mar 28, 2023

Brigida Crosbie, owner of Tydel Foods, says the philosophy of her business is 'people over profit.' She sells quality meat at low prices so people struggling with the cost of living can afford them. (Maggie MacPherson/CBC)

Ten years ago, Brigida Crosbie was homeless and eating out of the dumpster at the back of a KFC restaurant, but now she runs her own meat shop and goes out of her way to feed everyone who comes through her doors.

In 2020, Crosbie started Tydel Foods, a store staffed by volunteers in Chilliwack, a small city 90 kilometres east of Vancouver in B.C.'s Fraser Valley, that sells quality food cheaper than the big box stores. A rib-eye steak, for instance, goes for $8 less than at the supermarket. Striploin is $6 cheaper.

Her volunteers, many of whom became aware of her work through word of mouth or social media, say they signed up to help because they support what she's doing for the community.

Crosbie's store is often packed with customers, a sign of the deep need for affordable food as inflation hits record highs. The latest report from Food Banks Canada says the demand for food banks in B.C. increased by 25 per cent from 2021 to 2022, higher than the national average of 15 per cent.

She says she finds it surprising how easily she's able to sell her meat for less than a large grocery store.

"The big thing in my mind is if I could give this price and I'm just a person off the street that's just an advocate in the community, then how come the bigger box stores can't give it at a much lower price?"

WATCH | Brigida Crosbie talks about how she came to open her low-cost meat shop:

During a time of high food prices and inflation, a retired Chilliwack nurse is running a meat shop with volunteers that are helping her keep prices low.

Crosbie has programs focused on helping seniors, people with disabilities and those who are homeless.

For seniors, she offers packages containing a selection of meats for $50. On Saturdays, the store offers free soup, stew or chlli.

'When someone tells me they couldn't eat, I know exactly how that felt'

Crosbie says she manages to ensure everyone leaves her shop with food.

"When someone tells me they couldn't eat, I know exactly how that felt, and that's how I got into meat," said Crosbie, who says her business philosophy is "people over profit," and she chose meat because it's one of the biggest expenses on a food bill.

Crosbie says she started Tydel because she remembers what it's like to be hungry. 

A decade ago, she left an abusive partner, taking her two daughters, Tyanna and Delana. Although Crosbie was employed as a nurse at Fraser Health Authority, the family of three was temporarily homeless.

"You're sleeping on a concrete pillow, and then you had to eat out of the garbage — that was the worst thing," she recalled. 

Crosbie says her past experiences with hunger and homelessness motivated her to open her business. (Maggie MacPherson/CBC)

Eventually, with help from a friend who loaned her money and her bank, who helped her access emergency funds, Crosbie found an apartment for herself and her daughters in the mid-2010s.

When she retired from Fraser Health in 2020, she decided to open a low-cost food store. She began by googling how to run a business and took out a small loan.

She named the store Tydel, a melding of the names of her two daughters.

Demand for low-cost food

Crosbie says her empathy and past experiences have motivated her to give. She says she also experienced hunger in her childhood. Her father was in prison, and her mother, who died at 49, had substance use issues.

When customers who come into the store can't afford the prices or don't have any money, Crosbie says she gives them food for free.

Crosbie says she's able to turn a small profit because there's a high demand for low-cost food. She says she sets her prices only marginally higher than her cost, but the high volume of customers manages to keep her in business.

"The need is so high in the community for this price point of affordable food ... It's the turnover of people that come in that helps keeps us afloat," said Crosbie.

To help offset expenses, she says she uses the optional tips on her debit machine and pays for various expenses from her own pension cheque. 

"So long as I meet my lease, that's all that matters to me." 

Frequent customer Joanne Gianforte says she relies on Crosbie and her store. ((Maggie MacPherson/CBC))

Customers say they have come to rely on Tydel as the cost of living goes up.

"If it wasn't for her, a lot of us wouldn't eat properly," said Joann Gianforte, a frequent customer who is in her 70s and spends most of her income on rent.

• Charities offering hot meals grapple with shrinking donations — and soaring demand

• Vancouver charity tackles growing food insecurity while preventing waste

Chilliwack Mayor Ken Popove says he has gone on a number of delivery runs with Crosbie.

"She's a rock star. She provides an awesome service at awesome prices," said Popove, who added that some local food processors donate to Tydel Foods.

Popove says there is a need for more organizations like Crosbie's.

"The government's got to play a role in it too. They have in the past and continue to do so, but they need to step up."

Major Oil Producer In Kurdistan Shuts Down Fields After Export Halt

By Tsvetana Paraskova - Mar 29, 2023

The company pumping a quarter of Kurdistan’s crude oil exports, Norway-based DNO ASA, said on Wednesday it had started an orderly shutdown of its oil fields in the semi-autonomous region of Iraq, following the suspension of oil exports from Kurdistan via the Turkish port of Ceyhan.

Kurdistan’s crude oil exports – around 400,000 bpd shipped through an Iraqi-Turkey pipeline to Ceyhan and then on tankers to the international markets – were halted late last week by the federal government of Iraq.

Last week, the International Chamber of Commerce ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan. Iraq had argued that Turkey shouldn’t allow Kurdish oil exports via the Iraq-Turkey pipeline and Ceyhan without approval from the federal government of Iraq.

Exports have been shut in after the court ruling until the situation is resolved, which has resulted in companies operating in Kurdistan to start field shutdowns. Before the shutdown, the Iraq-Turkey Pipeline carried some 400,000 bpd of Kurdish oil and another 70,000 bpd of Iraqi oil for export from Ceyhan.  

For four days after the suspension of exports, DNO had diverted oil production to storage tanks, but capacity is limited, as previously announced, the company said in a statement today.

The DNO-operated Tawke and Peshkabir fields averaged combined production of 107,000 barrels of oil per day in 2022, accounting for a quarter of Kurdistan’s total exports. Peshkabir production was halted on Tuesday night and plans drawn up to conduct deferred maintenance. Tawke production shutdown has started but will take an additional day or so given the much larger numbers of wells spread across some 10 kilometers (6.2 miles).

“It is unfortunate it has come to this given the likely impact of a continuing supply disruption on oil prices and at a fragile time in global financial markets,” DNO’s Executive Chairman Bijan Mossavar-Rahmani said.

Another operator in Kurdistan, London-listed Gulf Keystone Petroleum, said on Monday that its facilities “have storage capacity that allow continued production at a curtailed rate over the coming days after which the Company will suspend production.”  

Oil Firm Starts Shutdown in Kurdistan Amid 

Iraq-Turkey Dispute

Paul Wallace and Verity Ratcliffe, Bloomberg News

,

(Bloomberg) --

One of the biggest oil producers in Iraqi Kurdistan has started to lower output as a dispute between the region’s government and Baghdad drags on.

Norway’s DNO ASA has started an “orderly shutdown of its operated oil fields” in Kurdistan, it said on Wednesday. It’s been diverting flows into storage since Saturday, but space is now running out.

A legal fight is halting roughly 400,000 barrels a day of Iraqi crude exports from the Turkish port of Ceyhan and has helped push up global prices. Those shipments may not resume for two or three weeks, leading to Iraq’s overall production falling by 200,000 barrels a day in April, according to FGE, a consultant for energy companies.

Negotiations aimed at getting the oil flowing again will continue, according to Lawk Ghafuri, head of foreign media affairs for the Kurdish government. A Kurdish delegation is expected to return to Baghdad soon, he said late on Wednesday.

The US has also weighed in, asking Iraq, the Kurdistan Regional Government and Turkey to ensure the oil starts flowing again soon. Oil prices have risen on concerns of an extended halt.

Turkey closed the pipeline running from northern Iraq to Ceyhan last week after an international business tribunal ruled that Kurdish authorities shouldn’t export oil from the Mediterranean terminal without Baghdad’s approval.

“It is unfortunate it has come to this given the likely impact of a continuing supply disruption on oil prices and at a fragile time in global financial markets,” said DNO’s Executive Chairman Bijan Mossavar-Rahman.

The company’s shares fell 1.5%.

Paris Ruling

The Paris-based International Chamber of Commerce largely ruled against Turkey in a case brought by Iraq’s federal government. The move was part of Baghdad’s long-running attempt to rein in the Kurdistan Regional Government, which ultimately wants independence, and take more control of its oil.

The ICC said Turkey had violated a pipeline transit agreement by allowing the KRG’s shipments to go ahead without consent from Baghdad.

Ankara says it’s essentially a clash between the KRG and Baghdad and that it’s always respected Iraq’s territorial integrity.

Turkey “stands ready to contribute in every way possible in finding a lasting solution between the true parties of this dispute,” its Energy Ministry ministry said on Tuesday.

Baghdad says it’s up to the KRG to break the deadlock by accepting that Iraq’s state oil-marketing firm, known as SOMO, should handle Kurdish exports.

“The ball now is in the Kurds’ court,” Asim Jihad, a spokesman for Iraq’s Federal Ministry of Oil, said in an interview on Tuesday. “What matters for the ministry is to speed up the resumption of exports.”

KRG’s Lifeblood

Oil is the lifeblood of the Kurdistan economy, accounting for more than half the KRG’s revenues. The regional government is losing out on millions of dollars for each day that exports are stopped.

The ICC ruling “leaves Baghdad in a strong negotiating position to regain control of the sales of Kurdish oil exports,” FGE said in a note to clients. “Despite the complexity of the situation, it is not out of the question that the parties can come to a temporary deal this week that sees exports resume this week or next.”

DNO is lowering output at the Tawke and Peshkabir fields, which together pumped 107,000 barrels a day of crude last year.

Peshkabir production was halted on Tuesday night, DNO said, adding it had drawn up plans to conduct maintenance. Tawke’s full shut down “will take an additional day or so given the much larger numbers of wells spread across some 10 kilometers,” according to DNO.

Genel Energy Plc, which is also in Kurdistan, said to Bloomberg on Wednesday that it’s continuing to send oil into storage from Taq Taq and Sarta, two fields it operates.

HKN Energy said it will stop output from the Sarsang Block, which pumps about 30,000 barrels a day, within a week if export flows do not resume soon.

(Adds comment)

©2023 Bloomberg L.P.

CRIMINAL CAPITALI$M

Credit Suisse Still Aiding Tax Evasion, US Senate Panel Says

David Voreacos, Bloomberg News

Signage outside a Credit Suisse office in the Flatiron District of New York, US, on Tuesday, March 21, 2023. UBS Group AG jumped as much as 10%, on track for its biggest gain since March 2020, as investor optimism about the takeover of its largest rival gathered pace. Photographer: Angus Mordant/Bloomberg , Bloomberg

(Bloomberg) -- Credit Suisse Group AG continues to help rich Americans hide assets from the IRS almost a decade after a unit pleaded guilty to a tax evasion conspiracy, the US Senate Finance Committee said, as the bank’s woes mount amid broader tumult in the industry.

The committee uncovered “major violations” of the $2.6 billion plea deal Credit Suisse reached with the Justice Department in 2014, according to a report released Wednesday. Among other items, it cited “what may be an ongoing criminal tax conspiracy” involving almost $100 million in secret offshore accounts belonging to a family of dual US-Latin American citizens. 

In a statement, Senator Ron Wyden, the Oregon Democrat who chairs the committee, slammed “greedy Swiss bankers” who appear to be engaged in a “massive, ongoing conspiracy to help ultra-wealthy US citizens to evade taxes and rip off their fellow Americans,” despite Credit Suisse’s promises.

Read the report here

Several other Swiss banks — Union Bancaire Privee, PKB Privatebank AG and Bank Leumi — received undeclared funds in 2012 and 2013 from the family, the committee said. UBP had no immediate comment, while PKB and Bank Leumi didn’t immediately respond to requests for comment.

Industry Turmoil, UBS Liability

The committee said Credit Suisse has identified at least $780 million in undeclared assets disclosed since the bank’s guilty plea in 2014, but much of it was first revealed to the US by whistleblowers. The assets include:

• $220 million from Dan Horsky, a US taxpayer who pleaded guilty in 2016
• Nearly $100 million from the family of US-Latin American citizens
• 23 other accounts of at least $20 million each

The panel’s report comes as the bank is being sold to rival UBS in an emergency deal amid global turmoil in the industry, set off by the run on Silicon Valley Bank in California. Meanwhile, UBS and Credit Suisse are under a Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. On top of all that, the report came out right after prosecutors in France raided some of the nation’s largest lenders, including Societe Generale SA and BNP Paribas SA, as they investigate suspected tax fraud and money laundering.

UBS’s acquisition of the beleaguered lender for 3 billion francs ($3.26 billion), brokered by the Swiss government, is the culmination of years of scandal and mismanagement at Credit Suisse. The report raises new challenges for UBS as it takes over a bank that could face further action from the Justice Department. 

As the Credit Suisse rescue plan emerged, UBS expressed concern about taking on its rival’s potential legal liabilities. Banks can face severe penalties for breaching US sanctions. BNP Paribas in 2014 agreed to pay almost $9 billion after pleading guilty to US charges for processing transactions for sanctioned Sudanese, Iranian and Cuban entities.

UBS Due Diligence

Credit Suisse said it does not tolerate tax evasion and that its new management is “actively cooperating” with the Justice Department to address any legacy conduct or policy concerns. 

“Our clear policy is to close undeclared accounts when identified, and to discipline any employee who fails to comply with bank policy or falls short of Credit Suisse’s standards of conduct,” the bank said in a statement Wednesday. 

UBS said in a statement that it “made an assessment of outstanding litigation and investigation matters” as part of its due diligence for the acquisition and that it expects the deal to benefit its shareholders “in a wide range of business scenarios.”

To oversee the historic acquisition, it is bringing back Sergio Ermotti as chief executive officer.

‘Repeat Offenders’

Under the 2014 plea agreement, Credit Suisse still must identify all undeclared accounts to the US Internal Revenue Service. The committee uncovered two dozen “large, potentially undeclared accounts,” including 10 clients identified last year and 13 disclosed by the bank in recent days. Each had $20 million or more. 

Wyden said the Senate’s investigation shows Credit Suisse didn’t live up to the 2014 deal and that its pending acquisition by UBS “does not wipe the slate clean.” He said the Justice Department must crack down on “repeat offenders like Credit Suisse” and pursue criminal investigations of individual bankers.

“It is deeply concerning that almost nine years after executives testified before Congress that the bank would clean up its act, Credit Suisse is still disclosing hundreds of millions of dollars in secret offshore accounts belonging to wealthy US taxpayers,” the committee said in its report.

More than $300 million of the assets — those involving Horsky and the family — were revealed by whistleblowers. The report includes detailed case studies of the bank’s failure to flag those assets to the IRS around the time of its guilty plea.

Potential Breach of Plea Deal

In 2013, the year before the bank’s plea, the family contacted “at least two former Credit Suisse bankers” for help in “discretely transferring funds,” the report said. Weeks later, the bank “began quietly and methodically closing the family’s accounts and transferring funds to other banks in Switzerland, Israel and elsewhere,” the panel found.

Under the plea agreement, the bank had to disclose all undeclared US accounts closed and transferred from August 2008 to May 2014. Disclosing those account holders, known to prosecutors as “leaver lists,” was a US requirement for Credit Suisse, several other Swiss banks that faced criminal charges, and 80 Swiss banks that made deals to avoid prosecution.

One informant believed closing those accounts required “discussions with Credit Suisse management and compliance,” the report said. “These allegations would constitute a major violation of Credit Suisse’s plea agreement with DOJ, as well as a conspiracy to allow the family to continue to conceal their assets from the IRS.” 

The whistleblowers’ lawyer, Jeffrey Neiman, said his clients “came forward with credible, now verified information that — even after 2014 and up until its demise — Credit Suisse continued to actively help Americans evade taxes and hide their money in offshore accounts.”

--With assistance from Myriam Balezou.

(Updates with details on family and on potential breaches of Credit Suisse plea deal in last section.)

©2023 Bloomberg L.P.

 

SVB Mess Festered Under Fed’s Bureaucracy and Feel-Good Culture

Hannah Levitt, Craig Torres and Saleha Mohsin, Bloomberg News

Silicon Valley Bank headquarters in Santa Clara, California, US, on Friday, March 10, 2023. Silicon Valley Bank became the biggest US bank failure in more than a decade, after its long-established customer base of tech startups grew worried and yanked deposits. Photographer: Philip Pacheco/Bloomberg , Bloomberg

(Bloomberg) -- For the Federal Reserve system, oversight failures ahead of the collapse of Silicon Valley Bank ran coast to coast.

At the San Francisco Fed — largely responsible for monitoring SVB — there was heightened turnover among supervisory officials in recent years, according to people close to the situation. The culture under President Mary Daly at times put more emphasis on improving relationships among staff than installing people with strong oversight backgrounds, leading to departures, the people said.

Staff for the Fed board in Washington had informed some officials of their concern around Daly’s management of her branch’s supervisory and regulatory work, according to four of the people familiar with the matter.

The sudden collapse of SVB — the second-largest bank failure in US history — and the ensuing fallout has the Fed reckoning with how its oversight went wrong. Lawmakers on Wednesday are set for a second day of testimony on the crisis from Vice Chair of Supervision Michael Barr, who is leading an internal review that’s set to be released by May. In and around the central bank, the finger-pointing has already started, with blame taking shape from the San Francisco branch to the Board of Governors ultimately in charge.

“There was a significant supervisory failure,” Dan Tarullo, a former Fed governor who oversaw financial regulation and supervision at the board, said Thursday on Bloomberg Television’s “Wall Street Week” with David Westin. One issue he raised was the Fed’s failure to stress-test banks for potential vulnerabilities from soaring interest rates, which were a major contributor to SVB’s downfall.

Bloomberg has reported that San Francisco Fed examiners identified warning signs at the California lender more than a year ago, and in recent months raised concern over the firm’s monitoring of risks tied to rising interest rates. Barr told the Senate Banking Committee Tuesday that supervisors issued multiple warnings to SVB and called its failure “a textbook case” of bad bank management.

Read more: SVB Management and Banking Rules Put on Trial at Senate Hearing

SVB — whose chief executive officer, Greg Becker, was on the San Francisco Fed’s nine-member board from 2019 until his company’s implosion — collapsed following bets on bonds that lost value as interest rates rose. Its Silicon Valley clients began drawing down their deposits en masse, forcing the lender to sell assets at losses and setting off a panicked run on the bank.

Becker, like directors of all regional Fed banks, had no involvement in the San Francisco Fed’s supervisory or regulatory decisions.

Supervisor Departures

Daly, an economist, took over as president of the San Francisco Fed in 2018 after more than two decades working there. Critics of the branch take issue with what they saw as her leadership team’s overzealous approach to improving happiness in the ranks, according to people close to the central bank’s inner workings, who asked not to be named speaking about internal matters.

One example: About a year into her tenure, Daly called a meeting with the supervision unit’s leadership. Internal employee satisfaction surveys had just come back, and the supervision group’s were the lowest. As the group’s managers gathered on the branch’s 12th floor, Daly scolded them, requesting they take the weekend to decide whether they wanted to continue working there. 

In Daly’s view at the time, low engagement in the supervision unit could have led to poor oversight outcomes, said a spokesperson for the San Francisco Fed, who declined to comment further or make Daly available for an interview. A representative for the Fed in Washington also declined to comment.

The San Francisco Fed’s supervision unit has since undergone multiple personnel changes, the people said. In 2021, the branch’s head of supervision, Tracy Basinger, retired after four years in the top job and decades climbing the ranks of that function. By contrast, her replacement, Azher Abbasi, was formerly head of audit. Basinger and Abbasi declined to comment.

It’s not entirely uncommon for supervisory heads at the regional branches to have backgrounds in other areas, and experience is required for some roles. Abbasi’s appointment was made in consultation with the central bank’s vice chair for supervision at the time, Randy Quarles. 

The San Francisco Fed also faces a unique challenge: Keeping tabs on Silicon Valley’s many aspirations for pushing into the banking world. But the branch was caught flat-footed in a notable episode.

Four years ago, Meta Platforms Inc.’s Facebook unveiled an ambitious global cryptocurrency effort then known as Libra. Some at the San Francisco Fed were unaware of the launch, according to two people with knowledge of the matter. There was so much regulatory blowback against the proposed offering that it was ultimately withdrawn.

Fed Review

The Fed’s Board of Governors has ultimate responsibility for bank oversight and sets the direction in supervising large institutions — a classification SVB officially took on more than a year ago. 

“The real question here is: How come the supervisors didn’t pick up on the fact that SVB had gamed the rules to take on a lot of interest-rate risk without holding an adequate amount of capital against it?” Lev Menand, an associate professor of law at Columbia University who researches money and banking, said on Bloomberg’s Odd Lots podcast. “It’s a pretty obvious maneuver and not a novel one — you would think any seasoned supervisor looking at the balance sheet could pick up on this quickly.”

At the Senate committee hearing Tuesday, lawmakers from both parties expressed shock and anger over SVB’s sudden collapse and the fallout. 

“It looks to me like the regulators knew the problem but nobody dropped the hammer,” Senator Jon Tester, a Montana Democrat, said to Barr.

Barr said the central bank is evaluating whether more stringent standards would have led to better risk management at SVB. He was unable to tell lawmakers whether Fed officials were visiting SVB’s offices in person on a daily basis or if supervisors met with the lender’s risk committee. 

As for the Fed’s internal review, he said that the culture and structure of oversight inside the central bank will get a look.

“Do supervisors have the tools to mitigate threats to safety and soundness?” Barr said. “Do the culture, policies, and practices of the board and reserve banks support supervisors in effectively using these tools?”

He has already rolled out one new measure. Supervisory staff are establishing a unit that looks at banks with novel risks. Unlike standard bank supervision where oversight gets tougher by size, the new team will be more focused on the risks novel banks are taking no matter how big they are, and will look horizontally across several of them.

Some of the SVB turmoil, meanwhile, has eased. The lender is set to be acquired by First Citizens BancShares Inc. — which would become one of the top 15 banks in the US.

(Update notes reserve bank directors have no involvement in supervision in ninth paragraph.)

©2023 Bloomberg L.P.