Top executives at Silicon Valley Bank and Signature Bank have refused to pledge to voluntarily pay back the millions of dollars that were paid out before the collapse of their banks triggered a regional US banking crisis.
In their first public appearances since the two lenders were shut down by regulators in March, ex svb former CEO Greg Becker, along with former Signature executives Scott Shay and Eric Howell, were questioned by Senate Banking Committee members about their roles in the recent bankruptcies.
Lawmakers including Elizabeth Warren, the progressive Democratic Senator from Massachusetts, have repeatedly asked Becker and Shay if they would pay back their pay to the Federal Deposit Insurance Corporation, which took on billions of dollars in losses following the collapse of the two banks.
Becker, who made nearly $10 million in 2022, has stopped pledging to pay back the money, but said he would “work with regulators during the process to look into that specific area.” Shay, who was paid $6 million last year, said she “wasn’t going to do it.”
Becker was also questioned by Chris Van Hollen, a Democratic senator from Maryland, about a relationship that executive pay at the SVB had soared after it began buying riskier assets exposed to rising interest rates.
Becker and Shay argued that their banks were well-managed lenders whose failures were the result of a confluence of events including aggressive interest rate hikes by the Federal Reserve, the collapse of Silvergate in the same week in March and bank runs exacerbated by social media.
“I truly believe that with the information we had at the time we made our decisions, we made the best decisions that we could have made,” Becker said.
In written testimony released Before the hearing on Monday, Becker blamed an “unprecedented” run on deposits fueled by “rumors and misconceptions” for SVB’s bankruptcy.
Democratic and Republican senators on Tuesday cautioned executives for a perceived lack of accountability. “Mr. Becker, you’ve blamed pretty much everyone else for SVB’s failures,” said Sherrod Brown, the Democratic chairman of the Senate Banking Committee.
Katie Britt, a Republican senator from Alabama, told Becker she was “concerned about the lack of accountability you’ve chosen to take on the role you’ve played leading to the bankruptcy you’ve led for the past 12 years.”
Senators called a hearing to look into the bankruptcies of SVB and Signature in early March, which shook confidence in US regional lenders and led to the collapse of the First Republic last month. A separate House hearing addressed the oversight by US banking regulators.
The primary cause of California-based SVB’s eventual bankruptcy was its decision to invest a wave of deposits from technology companies and venture capital firms in a portfolio of securities composed primarily of US mortgage and debt securities at long term. These investments fell in value when the Fed started raising interest rates last year.
The decision to sell a portion of its stock at a $1.8 billion loss based on what Becker said was advice from Goldman Sachs spooked investors and depositors, sparking a bank run and leaving SVB struggling to raise new capital.
Goldman, which worked on a separate capital raising attempted by SVB at the same time, said on Monday that it had advised SVB in writing that it would not act as its adviser on the sale of securities and that SVB should not rely on any advice from part of SVB. in this matter.
New York-based Signature was seized by regulators just days after SVB closed. The bank had more than doubled its deposits by 2022 as it was one of the few lenders to accept funds from clients involved in cryptocurrencies.
Brown accused SVB and Signature executives of prioritizing profits over the safety of their clients’ deposits.
“We took risk management seriously,” Becker said. Sen. Tim Scott of South Carolina, the top Republican on the banking committee, said it was “hard to believe” Becker’s defense.
In the House on Tuesday, Michael Barr, the Fed’s vice chairman for oversight, said the US banking system as a whole was “healthy and resilient” despite the recent period of “acute stress.”
Patrick McHenry, the Republican chairman of the House Financial Services Committee, accused the Fed of being too slow to react to rising inflation, causing interest rates to rise rapidly over the past year. This had “injected more interest rate risk into the financial system,” he said.
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