Sen. Mark Warner (D-VA) asked Treasury Secretary Janet Yellen during a Senate Finance Committee hearing on Thursday in Washington, DC, about censorship of online communications to prevent what he said was “the very first social media Internet-based bank run” — in reference to the failure of Silicon Valley Bank (SVB).
Warner framed unspecified economic and financial online commentary as beyond First Amendment protections by twice analogizing unspecified online remarks to “shouting ‘fire’ in a crowded theater.”
Warner stated:
We’ve seen now the very first social media Internet-based bank run. Put this in any kind of comparison: when [Washington Mutual] failed — the largest bank failure in our country’s history — $16 billion coming out over a ten-day period.
I don’t show what regulatory system anywhere — no matter how much capital, no matter how many stress tests — that would have protected any institution from a $42 billion-dollar bank run in a single day, that literally at that point was 25 cents on the dollar of every dollar that was deposited.
I think we, most of us, have all seen It’s a Wonderful Life; we realized that that money was often small businesses’ and start-up businesses’ around the country. The question I have is who’s playing the role of Mr. Potter?
I’ve been supportive of the venture capital community. I was a venture capitalist before, but I think there were some bad actors in the VC community who literally started to spur this run by virtually crying “fire” in a crowded theater in terms of rushing all these deposits out, and I’m not sure that we have anything in our existing regulatory structure, and it’s early on, and we need to figure out what happened and who missed this, but this notion that you, 25 cents on every dollar, can rush out in a single day and people who spur this online — Tuesday and Wednesday night — bear no responsibility, and the hypocrisy of some who are, who are libertarian until the stuff hits the fan and then want relief is frankly more than a little repugnant.
This is not normally within the traditional banking regulatory [framework], but I think this will go down as history’s first Internet-driven run.
Warner concluded by repeating his characterization of certain economic and financial online commentary as akin to negligent inducement of panic and outside of First Amendment protections of free speech and expression.
“The idea that there is no responsibility for the equivalent of shouting ‘fire’ in a crowded theater and forcing that run using technology as a mechanism to accelerate that presents a problem that, I think — I hope — we can all kind of put our heads jointly together on.”
On Sunday, Sen. Mark Kelly (D-AZ) similarly inquired about digital censorship of “social media” during a conference call with representatives from the Federal Reserve, Treasury Department, and the Federal Deposit and Insurance Corporation (FDIC) regarding the collapse of SVB and Signature Bank.
Follow Robert Kraychik on Twitter @rkraychik.