Senators grill former SVB CEO over "fatally mismanaged" bank
Former Silicon Valley Bank CEO Greg Becker and two former executives from Signature Bank were grilled by a Senate committee Tuesday and skewered for the failures of the financial institutions they led.
Why it matters: It was Becker's first public appearance in the wake of SVB's failure — a shocking collapse that set off a mini-banking crisis that the system is still sifting through.
Catch up quick: The run on SVB was unlike any in U.S. history. On March 9, $42 billion in deposits were withdrawn from the bank in 10 hours — that's "roughly $1 million a second," Becker noted in his testimony.
- The next day, another $100 billion in withdrawal requests were on tap, he said, bringing the total to 80% of the bank's total deposits — and the FDIC took possession of the bank.
State of play: Senate Banking Committee chair Sherrod Brown (D-Ohio), laid the blame for the bank failures at the feet of these executives, with many other senators joining in to hammer Becker — especially over mismanagement and failure to hedge the bank's interest rate risk.
- "We know your banks were fatally mismanaged. The next obvious question is why? Why did you let things get this bad?" Brown said.
- The ire was bipartisan. “I'm shocked at the complete negligence and disregard for the economic realities that this country was facing under your leadership," Sen. Tim Scott (R-SC) said to Becker.
- "Mr. Becker, you made a really stupid bet that went bad," said Sen. John Neely Kennedy (R-La.)
- Sen. JD Vance (R-Ohio) hammered Becker over his pay. "So in 2022, in particular, you paid yourself a $1.5 million cash bonus even as the value of the company that you were managing declined by two thirds. That's not bad work, if you can get it."
- Senators also blamed lax regulation and regulatory failures for what happened.
What's next: Senators said they are trying to claw back executive compensation from leaders at both banks. Sen. Elizabeth Warren (D-Mass.) pointed to a bipartisan bill that proposes to do just that.
The response: At the hearing, Becker and Shay seemed to blame everyone but themselves for what happened. In Becker's opening remarks, he called the bank's failure unprecedented.
- "Rumors and misconceptions" led to the unprecedented bank run. Ultimately, Becker said, the run was too much to handle.
- "I do not believe that any bank could survive a bank run of that velocity and magnitude," he said. The failure of the bank was "personally and professionally devastating, and I am truly sorry for how this has impacted SVB’s employees, clients, and shareholders."
- More than two hours into the hearing, after he was pressed on what he could've done differently, Becker said: "I was the CEO of Silicon Valley Bank. I take responsibility for what ultimately happened."
Meanwhile: The cofounder of Signature Bank, Scott Shay, told senators that he didn't think the FDIC needed to shutter his bank.
- “Although I believed that the bank was in a strong position to weather the storm, regulators evidently saw things differently."
- His colleague, former Signature president Eric Howell, said he did not believe mismanagement played a role in the bank's failure.
Background: At least three different reports from regulators released earlier this month pin a big chunk of blame for what happened on the banks themselves. Senators quoted from these reports on Tuesday.
- The Federal Reserve issued a 114-page report blaming both SVB and lax regulation for the bank's collapse in March.
- The FDIC put out an internal review of its handling of Signature Bank, that details how regulators' warnings about risks were brushed off and ignored by the bank.
In a separate hearing on Tuesday, bank regulators — including those from the Federal Reserve, FDIC, and the Office of the Comptroller of the Currency — were pushed on what led to the bank collapses and what possible rule changes were ahead as a result.
- Fed banking cop Michael Barr said the central bank was considering tougher rules for banks with $100 billion or more in assets — including one that would take the bank's unrealized losses into account when setting capital levels.