WASHINGTON–In his first public remarks since the collapse of Silicon Valley Bank, its former president and CEO blamed everyone but himself for the failure, including regulators, the media, his board of directors and even the bank’s own depositors.
Gregory Becker, who was fired from SVB shortly after its March failure, earned “bipartisan derision” for his explanations during testimony before the Senate Banking Committee, noted the New York Times, which added that although Becker repeatedly said SVB’s failure was unforeseeable, senators took a “sharper view” of his decision making.
“It was bone-deep, down-to-the-marrow stupidity,” Sen. John Kennedy (R-LA) said.
The failure of the $200-billion-plus Silicon Valley Bank, followed in short order by Signature Bank and First Republic Bank, also led to a hearing in the House at which financial regulators that included NCUA Chairman Todd Harper appeared, as CUToday.info reported here.
As the Times noted, the collapse was precipitated by the bank’s decision to buy up government bonds in an era of low interest rates, particularly during the pandemic. Those bonds dropped in value when runaway inflation caused policymakers to quickly raise interest rates, making relatively low-yielding, older bonds less attractive to investors and “blowing a hole” in SVB’s books.
High Levels of Uninsured Funds
As CUToday.info has also reported, SVB also had an unusually high proportion of accounts with more than $250,000 in deposits, above the threshold for FDIC deposit account coverage. Approximately 90% of the bank’s deposits were uninsured; for credit unions overall, that figure is about 10%.
A three-decade SVB veteran, Becker was named CEO in 2011 and oversaw its rapid growth.
“I worked at a place I truly loved,” Becker said during his testimony, saying he is “truly sorry” for what happened.
Becker said that at the time of SVB’s failure, he was working with regulators to shore up the bank, the Times reported.
Blaming the Media
“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 pull en masse,” the report stated. “He blamed the media for raising questions about the firm’s financial disclosures, and government officials for allowing inflation to spike to the point where rapid interest rate increases 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 dragging down the lender’s overall profitability.”
The Times said that when one senator asked Becker about his own mistakes, the former CEO said he had thought about that 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 (D-OH),
Millions in Comp
In addition, the Times said many of the questions faced by Becker from both sides of the political aisle involved his pay, 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 those sales were preplanned and that he wasn’t acting on any nonpublic information, the Times report added.
“From the standpoint of compensation, that is determined by the board of directors,” Becker told the Senate. “I know they believed it was fair, and I believe they were accurate.”
No Plan to Return Pay
Becker and another former bank leader who testified, Signature Bank co-founder Scott Shay, were asked if they would give back any of their bonuses, given what happened, Shay said he would not, calling his fallen institution a “responsibly managed bank.”
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