Former SVB CEO Becker deflects blame for collapse

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In his first public remarks since the collapse of Silicon Valley Bank sparking widespread unrest in the industry, the former managing director of Lenders pointed the finger at just about everyone but himself for the demise of Lenders , blaming regulators, the media, its board of directors and even the banks own their depositors.

Gregory Becker, who was fired from the SVB shortly after his failure in March, drew derision from both parties on Tuesday for his explanations during testimony before the Senate Banking Committee. Although Mr. Becker repeatedly said that the dismantling of the SVB was due to unforeseeable circumstances, the senators had a clearer view of his decision-making.

It was stupidity to the bone, Senator John Kennedy, Republican of Louisiana, told him.

The collapse of the SVB two months ago drew criticism from all quarters. The San Francisco lender, with a heavy concentration of clients in the technology and venture capital sectors, collapsed after a bank run that lasted only a few days. In the aftermath, two other lenders, Signature Bank and First Republic, also collapsed, while several other mid-sized banks continue to raise serious concerns among investors.

The collapse was precipitated by banks’ decision to buy government bonds at a time of low interest rates, particularly during the pandemic. These bonds lost value when runaway inflation caused policymakers to rapidly raise interest rates, making older, relatively low-yielding bonds less attractive to investors and denting SVB books.

SVB also had an unusually high proportion of accounts with more than $250,000 in deposits, the threshold to be government-insured in the event of default, which made it particularly vulnerable to the risk of bank runs as depositors who worried about their money were rushing to withdraw it. .

Mr. Becker had not publicly addressed the collapse until Tuesday’s hearing. A three-decade veteran of SVB, he became chief executive in 2011 and oversaw its rapid growth over the following years.

I worked in a place that I really liked, he said, saying he was really sorry for what happened.

Mr Becker said at the time of the SVB failure he was working with regulators to shore up the bank. He said the SVB’s large uninsured accounts were a function of its focus on companies and individuals whose wealth was growing, and that he could not have imagined they would all be fired en masse due to their long history. history with the bank.

He accused the media of raising questions about companies’ financial disclosures and government officials of allowing inflation to soar to the point where rapid increases in interest rates were needed. When asked to identify one of his own failures, he could not.

Looks like my dog ​​ate my homework, said Sen. Sherrod Brown, Democrat of Ohio.

The Federal Reserve, which regulates banks, blamed itself in part last month for ignoring warning signs from the SVB. His most vocal criticism, however, was aimed at bank executives, including Mr Becker, who he said took unsustainable financial risks to maintain the lender’s rapid growth.

In a separate hearing on Tuesday, Michael Barr, the Fed’s vice chairman for oversight, said that

When SVB executives discovered a problem with their liquidity test, they changed the test to make it less conservative, calling it the opposite of what you would want a bank to do when facing risk.

Many of the questions Mr. Becker faced on Tuesday related to his salary, which has increased as the bank has grown. He made nearly $10 million in 2022 and cashed in millions in stock options in the weeks before lenders collapsed. He testified that these sales were pre-planned and that he was not acting on any non-public information.

From the point of view of remuneration, this is determined by the board of directors. I know they thought it was right, and I believe they were right, he said.

When asked by senators from both parties if he would return any of his bonuses, Mr Becker repeatedly said he was waiting to see if regulators would force him to.

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

Mr. Becker declined to answer.

Jeanna Smialek contributed reporting.

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