May 31, 2023

In his first public remarks since the collapse of Silicon Valley Bank, which sparked widespread unrest in the industry, the former CEO of the lender pointed the finger at virtually everyone but himself for the lender’s demise, placing the blame on regulators, the media, its board of directors and even the bank’s own depositors.

Gregory Becker, who was fired from the SVB shortly after the SVB’s failure, earned bipartisan derision Tuesday for his explanation during testimony with the Senate Banking Committee. Although Mr. Becker has repeatedly said that the dissolution of the SVB was caused by unforeseen circumstances, senators have taken a closer look at his decision-making.

“It was bone-deep, to the bone stupidity,” Louisiana Republican Senator John Kennedy told him.

The bankruptcy of the SVB two months ago has drawn criticism from all quarters. The San Francisco lender, with a high concentration of clients in the tech and venture capital industries, fell apart after a bank run that lasted just a few days. In the wake, two other lenders, Signature Bank and First Republic, also collapsed, while several other medium-sized banks remain the subject of serious investor concern.

The collapse was precipitated by the bank’s decision to buy up government bonds in an era of low interest rates, especially during the pandemic. Those bonds fell in value as runaway inflation caused policymakers to quickly raise interest rates, making relatively low-yield, older bonds less attractive to investors and blowing a hole in the books of the SVB.

SVB also had an unusually large number of accounts with more than $250,000 in deposits, the limit for being government insured in the event of a failure, putting it at particular risk of a bank run – as savers worried about their money rushed to withdraw money.

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

“I worked in a place that I really loved,” he said, calling himself “really sorry” for what happened.

Mr Becker said he was working with regulators to support the bank at the time of the SVB’s bankruptcy. He said the SVB’s large, uninsured accounts were a function of its focus on companies and individuals whose net worth was growing, and that he couldn’t have imagined all of them flocking because of their long histories with the bank.

He blamed the media for questioning the company’s financial disclosures and government officials for driving inflation so high that rapid rate hikes were necessary. Asked to identify his own failures, he couldn’t.

“It sounds like my dog ​​ate my homework,” Ohio Democrat Senator Sherrod Brown said.

The Federal Reserve, which regulates banks, partly blamed itself last month for ignoring warning signs at SVB. However, the strongest criticism has been directed at the bank’s leaders, including Mr Becker, who he says took unsustainable financial risks to help the lender grow rapidly.

In a separate hearing on Tuesday, Michael Barr, the Fed’s vice chairman for oversight, said that when SVB executives found a problem with their liquidity stress test, they changed the test to make it less conservative, calling it “the opposite of what you would do”. want a bank to do’ when it was at risk.

Many of the questions Mr Becker faced on Tuesday related to his salary, which increased as the bank grew. He made nearly $10 million in 2022, cashing in millions in stock options in the weeks before the lender collapsed. He testified that those sales were pre-planned and that he was not acting on nonpublic information.

“From a remuneration point of view, that is determined by the board of directors. I know they believed it was fair, and I believe they were right,” he said.

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

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

Mr. Becker declined to answer.

Jeanna Smilek reporting contributed.