First came bank failures. Now comes the House hearing on what went wrong.

Plus, Banks aren't out of the woods yet and neither is the economy. Here's why

View in browser By Krystal Hur • Sunday, March 26 Good morning. In today's newsletter: Investors are anticipating the upcoming House hearing on the collapses of Silicon Valley Bank and Signature Bank. Here's what they're watching for. Plus, banks aren't out of the woods yet.   ▸ Forwarded this newsletter? Want global markets news and analysis from CNN Business reporters every morning? You can sign up here. CAPITOL FLASH First came bank failures. Now comes the House hearing Federal regulators are being called to testify before the House Financial Services Committee on Tuesday about the collapse of Silicon Valley Bank and Signature Bank. Here's who's slated to appear on the witness stand: ▸ Martin Gruenberg, Chairman, Board of Directors of the Federal Deposit Insurance Corporation ▸Michael Barr, Vice Chair for Supervision, Board of Governors of the Federal Reserve ▸Nellie Liang, Under Secretary for Domestic Finance, US Treasury Department   The hearing is likely to be the first of many covering the events that spiraled into a banking crisis that sent customers fleeing from regional banks and sent markets into a frenzy.  What lawmakers are saying: Elected officials want a review of what happened at Silicon Valley Bank and Signature Bank earlier this month, as well as stricter regulations to prevent it from happening again. A key theme will likely be: Why didn't anyone see the collapses coming? Or, perhaps, did anyone see it coming? "It is critical that we get to the bottom of how Silicon Valley Bank and Signature Bank collapsed so that we can maintain a strong banking system, protect Americans' hard-earned money, and hold those responsible accountable, including the CEOs," said US Sen. Sherrod Brown, a Democrat who has called for the executives of Silicon Valley Bank to be held accountable for the bank's failure. US Sens. Elizabeth Warren of Massachusetts and Rick Scott of Florida last Wednesday introduced legislation requiring an inspector general appointed by the president to report on the Federal Reserve Board and Bureau of Consumer Financial Protection. What's happened so far: The government has already set the wheels in motion for delving into the factors that contributed to the banks' collapses. The Federal Reserve Board on March 13 said that Barr is spearheading a review of Silicon Valley Bank, with the report set for public release by May 1. Treasury Secretary Janet Yellen on Friday led a private meeting with financial regulators held by the Financial Stability Oversight Council, which was founded in 2010 as part of the Dodd-Frank law as a watchdog for the financial system. The federal government and key players in the banking sector have intervened in recent weeks to contain the tumult.  Regulators on March 12, just days after SVB collapsed, announced a guarantee of all deposits at the bank and Signature Bank. The Federal Reserve that same day announced a new funding program for eligible financial institutions to help them meet liquidity needs. In the days that followed, the nation's biggest banks intervened to rescue First Republic after its shares plunged. When the fear spread to Credit Suisse, the Swiss government and rival bank UBS stepped in to save the embattled lender. What to expect: It's unclear what will come of the hearings on SVB and Signature Bank.  While the banks' collapses have been driven in part by poor investment choices and the Fed's tightening of the economy, everyone from the tech sector to Wall Street has questions about how internal oversight, or the lack of it, could also have been a factor.  But a trail of clues suggest that the bank's demise didn't happen out of the blue, including its lightning-fast growth, clientele of tech start-ups and a vacant chief risk officer position. Depending on who's called to testify during the hearings to come, some might have to answer how they missed these red flags. ECONOMY WATCH Banks aren't out of the woods yet and neither is the economy.  Markets seesawed severely last week when two of the US economy's most prominent leaders gave seemingly contradictory statements on the health of the banking sector. Expect more turbulence ahead.   Fresh off of the Federal Reserve's decision last Wednesday to hike interest rates by a quarter point, Fed Chairman Jerome Powell said in the central bank's post-meeting press conference that "all depositors' savings are safe."   But elsewhere in Washington D.C, Treasury Secretary Janet Yellen testified last Wednesday before a Congressional committee that she wasn't considering a guarantee of all deposits.   A day later, Yellen said in something of a reversal that the federal government is ready to take more action to stop bank contagion if necessary to curb systemic risk.   "It kind of reeks of a lack of leadership from the people we need leadership from," says Matthew Tuttle, CEO and CIO of Tuttle Capital Management. "They've got to get their story straight."   The apparent disconnect baffled Wall Street investors, who for weeks have been searching for clues about the state of the banking sector and what the crisis means for the Fed in its fight against inflation.   This resilience is driven partly by the Fed's signaling that it will pause interest rate hikes later this year. But the evolving banking crisis makes it unclear if the central bank's best-laid plans will pan out.   And, going forward, the banking crisis is just one factor to consider when thinking about how markets will act. The Fed's still waging its war against inflation, and while the economy seems robust now, that's not guaranteed to stay true.   Already, investors have sought safe alternative spaces for their cash as the market churns. Bitcoin has jumped in recent weeks. Money market indexes, thought to be one of the safest and lowest-risk investment options, have seen a huge influx of cash. Gold, another perceived haven, has climbed -- and will likely continue to see upside.   And the Fed's rate hikes will continue to punish the financial sector.   Read more here. UP NEXT Monday: Fed Governor Philip Jefferson speaks.  Tuesday: The House Financial Services Committee holds a hearing on the banking crisis. S&P Case-Shiller home price index and consumer confidence data from the Conference Board. Wednesday: The House Financial Services Committee's hearing on the banking crisis continues for a second day. Pending home sales. Thursday: Q4 GDP and jobless claims. Friday: Fed Governor Christopher Waller speaks. PCE and the University of Michigan consumer sentiment and inflation expectations. Like our newsletter? Tell your friends to sign up here. WHAT WE'RE READING AND WATCHING ▸ Where TikTok users may go if the app gets banned (CNN Business) ▸ Where to Put Your Money During a Banking Crisis (WSJ) ▸ What the banking crisis means for your job (CNN Business) ▸ TikTok Claims It's Limiting Teen Screen Time. Teens Say It Isn't. (NYT) ▸ SVB Collapse Could Mean a $500 Billion Venture Capital 'Haircut' (Bloomberg) ▸ Fed official: People 'hate' inflation. That trumps bank stress and job loss (CNN Business) BEFORE THE BELL You are receiving this email because you've signed up to receive Before the Bell.   No longer want to receive these updates? Unsubscribe. Interested in more? See all of our newsletters.   Create CNN Account | Listen to CNN Audio | Download the CNN App    ® © 2023 Cable News Network, Inc. A Warner Bros. Discovery Company. All Rights Reserved. One CNN Center Atlanta, GA 30303