SVB’s Ex-C.E.O. Becker Deflects Blame for Collapse

In his first public statement since the failure of Silicon Valley Bank, causing widespread turmoil in the industry, the former chief executive of the financier blames almost everyone but himself for the financier’s demise. , blaming regulators, the media, boards and even financial institutions. Bank’s own depositor.

Gregory Becker, who was fired from SVB shortly after its March bankruptcy, drew bipartisan ridicule for explanations in testimony before the Senate Banking Committee on Tuesday. Becker repeatedly said the SVB’s unwinding was caused by unforeseen circumstances, but senators took a sharper view of his decision-making.

Louisiana Republican Senator John Kennedy said he was “dumb to the bone.”

The bankruptcy of SVB two months ago has drawn criticism from all quarters. A San Francisco financier with many clients in the tech and venture capital industries filed for bankruptcy after a bank run that lasted just days. Two other financial institutions, Signature Bank and First Republic, also collapsed in the aftermath, and several other mid-sized banks remain a subject of serious concern among investors.

The bankruptcy was caused by the bank’s decision to buy up government bonds, especially in an era of low interest rates during the pandemic. As inflation ran wild and policymakers quickly hiked interest rates, the value of these bonds fell, making older bonds with relatively low yields less attractive to investors and creating a hole in SVB’s books.

The SVB also reported an unusually high percentage of accounts holding deposits of $250,000 or more, the upper limit for government insurance in the event of bankruptcy, and depositors worried about their cash rushed to withdraw funds. was at risk. that.

Becker did not publicly address the bankruptcy until Tuesday’s hearing. A veteran of his 30 years at SVB, he took over as CEO in 2011 and oversaw rapid growth in the following years.

“I worked in a place that I really loved,” he said, adding that he was “really sorry” for what had happened.

Becker said he was working with regulators to strengthen the bank at the time of SVB’s collapse. He said the SVB’s large uninsured accounts are a result of its focus on companies and individuals whose wealth is growing, and that they are leaving en masse because of their long history with the bank. said he could not imagine.

He accused the media of questioning the company’s financial disclosures and that government officials allowed inflation to skyrocket to levels that required rapid rate hikes. He was asked to identify his own failures, but was unable to do so.

“I feel like my dog ​​ate his homework,” said Ohio Democratic Senator Sherrod Brown.

The Federal Reserve, which regulates banks, blamed itself in part for ignoring the SVB’s warning signs last month. But most of the criticism has been directed at bank executives, including Becker, who said they were taking intolerable financial risks to sustain the bank’s rapid growth.

At a separate hearing on Tuesday, Fed Deputy Chairman of Supervisors Michael Barr said SVB executives changed the test to be more conservative when they found problems with the liquidity stress test, saying it ” It’s the opposite of what we expected,” he said. What you want your bank to do when faced with risk.

Many of the questions Becker faced on Tuesday were about his salary, which has increased as the bank has grown. He will make nearly $10 million in 2022 and cashed in millions of dollars in stock options in the weeks that financial institutions collapsed. He testified that these sales were planned in advance and he did not act on nonpublic information.

“From a compensation standpoint, it’s a board decision. I know they believed it was fair, and I believe they were right,” he said.

When senators from both parties asked if he planned to return the bonus, Becker reiterated he was waiting to see if regulators would force it back.

“Let’s say it was legal,” asked Ohio Republican Senator J.D. Vance. “Was it ethical?”

Becker declined to answer.

Gina Smirek Contributed to the report.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button