After a handful of influential voices took to social media during the meltdowns of Silicon Valley and Signature banks this month, some lawmakers have floated a new idea: Task bank regulators with keeping tabs on TikTok, Twitter and other platforms to head off future bank panics.
Rep. Ritchie Torres, D-N.Y., introduced legislation Wednesday that would require the Financial Stability Oversight Council, a coalition of U.S. financial regulators, to monitor social media platforms for “any indicator of a potential bank run or financial panic at a level that potentially threatened the financial stability of the United States.”
Torres, who announced the proposal on MSNBC, said monitoring social media could also address concerns over foreign interference.
“I worry that a malicious foreign adversary could manufacture financial panic on social media to destabilize the American banking system,” Torres said on MSNBC’s “Morning Joe.”
At a House Financial Services Committee hearing Wednesday, several other lawmakers expressed worry about social media’s role in triggering bank runs. Rep. Blaine Luetkemeyer, R-Mo., said he had “grave concerns” about that possibility.
Bank regulators acknowledged this week that online panic may have helped hasten SVB’s failure, although they also cited the ease of pulling deposits due to digital banking.
“I do agree that the runs that occurred at Silicon Valley [Bank] were unprecedented in speed and size, aided by social media and technology,” Nellie Liang, the undersecretary of the treasury for domestic finance, said in congressional testimony Wednesday. “Those are new risks that challenge the banking system and the financial system and are those we definitely need to be considering and working with Congress.”
Three weeks ago, SVB dumped a bad bet on interest rates that cost it $1.8 billion, sparking fears among depositors that it was strapped for cash.