Former SVB boss tells the senate that he is “really sorry” for the collapse, but deflects blame

In his first public remarks since the Silicon Valley Bank collapsed, sparking widespread industry turmoil, the lender’s former CEO pointed the finger at pretty much everyone but himself, laying the blame on regulators, the media, the board and even the bank’s own depositors.

Gregory Becker, who was fired from SVB shortly after the fiasco in March, drew cross-party scorn on Tuesday for his statements during testimony before the Senate Banking Committee. Although Becker repeatedly said that SVB’s liquidation was unpredictable, the senators took a sharper view of his decision-making.

“It was bone-deep, bone-deep stupidity,” Sen. John Kennedy, Republican of Louisiana, told him.

SVB’s failure two months ago has caused criticism from all sides. The San Francisco lender, with a high concentration of clients in the technology and venture capital industries, unraveled after a bank run that lasted just a few days. In its wake, two other lenders, Signature Bank and First Republic, collapsed, while several other mid-sized banks remain the subject of serious investor concern.

The collapse was precipitated by the bank’s decision to buy up government bonds at a time of low interest rates, especially during the pandemic. These bonds fell in value when ongoing inflation prompted politicians to quickly raise interest rates, which made relatively low-yielding, older bonds less attractive to investors and blew a hole in SVB’s books.

SVB also had an unusually high proportion of accounts with more than $250,000 in deposits, the limit to be government-insured in the event of a failure, making it particularly vulnerable to a bank run — as depositors worried about their cash rushed to withdraw it.

Mr. Becker had not spoken publicly about the collapse before Tuesday’s hearing. A three-decade SVB veteran, he became CEO in 2011 and oversaw its rapid growth in the following years.

“I was working at a place I really loved,” he said, calling himself “sorry” for what happened.

Mr. Becker said that at the time of SVB’s failure, he was working with regulators to strengthen the bank. He said SVB’s large, uninsured accounts were a function of its focus on businesses and individuals whose own wealth was growing, and that because of their long history with the bank, he could not have imagined they would all draw massively.

He blamed the media for questioning the firm’s financial disclosures, and government officials for allowing inflation to rise to the point where rapid rate hikes were necessary. SVB’s board, he said, chose not to hedge, or offset, the bank’s bond holdings, a move that many analysts have said would have reduced risk while reducing the lender’s overall profitability.

Asked by a senator to identify some of his own mistakes, Becker said he had thought about the question every day for the past eight weeks and could not come up with an answer.

“It sounds a lot like ‘my dog ​​ate my homework,'” said Sen. Sherrod Brown, Democrat of Ohio.

The Federal Reserve, which regulates banks, last month accused itself of ignoring warning signs at SVB. However, the strongest criticism was aimed at the bank’s executives, including Mr Becker, who it said took unsustainable financial risks to keep the lender growing rapidly.

In a separate hearing on Tuesday, Michael Barr, the Fed’s deputy chairman for supervision, said that when SVB managers found a problem with their stress testing, which simulated the impact of a crisis, they changed the test to make it less stringent, calling it “the opposite of what you wanted a bank to do” when faced with risk.

Democrats on Capitol Hill have introduced legislation to increase banking regulation, saying the rapid collapse of SVB and others was evidence that the industry requires more oversight. Some Republicans argue that the events prove the opposite: that regulations already on the books are not effectively enforced, and that adding more would be foolhardy.

Many of the questions Mr. Becker faced from both sides of the political aisle Tuesday involved his salary, which rose as the bank grew. He earned nearly $10 million in 2022 and cashed out millions in stock options in the weeks before the lender’s collapse. He testified that these sales were pre-planned and that he did not act on the basis of non-public information.

“From a compensation standpoint, it’s decided by the board,” he said. “I know they thought it was fair, and I think they were accurate.”

Mr. Becker and another former bank executive who testified, Signature Bank co-founder Scott Shay, were asked whether they would give back any of their bonuses, given what happened to their banks so soon afterward. Mr. Shay said he would not, calling his fallen institution a “responsibly managed bank.”

“Your opinion of what constitutes a responsibly managed bank is now ridiculous,” Sen. Elizabeth Warren, Democrat of Massachusetts, told him.

As for his bonuses, Becker said he was waiting to see if regulators would force him to return them.

“Let’s say it was legal,” asked Sen. JD Vance, Republican of Ohio. “Was it ethical?”

Mr. Becker declined to answer.

Jeanna Smialek contributed reporting.

Source link

Back to top button

mahjong slot