'You made a really stupid bet': Senators grill SVB CEO over accountability and pay

Silicon Valley Bank CEO Greg Becker told lawmakers Tuesday that he was justly compensated as “unprecedented events” caused the lender’s failure, pushing back against assertions that he enriched himself while ignoring risks.

Several members of the Senate Banking Committee asked if he planned to give back any money he earned in the run-up to the bank’s March 10 seizure, and if he was aware Silicon Valley Bank was in trouble when he sold stock in the weeks before the collapse.

Becker was non committal about returning any compensation but said he believed he was not in possession of any material, non-public information when he sold stock in late February. He noted that he regularly sold the underlying shares of his stock options before they expired through 10b5-1 plans.

The $1.5 million bonus he received for his 2022 performance, he added, was determined by the bank’s board of directors. Several senators asked if he believed he deserved it.

“I know they believed it was fair and I believe they were accurate,” he said, adding that he would cooperate with regulators to “look at that specific area.”

The testimony from Becker before the Senate Banking Committee that lasted roughly two and half hours was his first public appearance since Silicon Valley Bank went down nearly 10 weeks ago, an event that triggered widespread panic in the financial system.

'Basic accountability'

Two other sizable institutions, Signature Bank and First Republic, were also seized by regulators in the chaos that followed.

Former Signature executives also appeared alongside Becker Tuesday, and they received similar questions about their past pay.

Scott Shay, who was the bank’s chairman, told committee members that he didn’t plan to give his compensation back to the Federal Deposit Insurance Corporation, the regulator that seized the failed banks.

Four senators, including Elizabeth Warren, have introduced legislation that would give the FDIC authority to claw back any pay made to executives in the five years leading up to a bank's failure.

Warren on Tuesday was among the lawmakers who asked whether Becker would return his past compensation. She cited $40 million Becker had earned in the last five years.

"The collapse of your bank cost the FDIC fund $20 billion," she said. "I want to know about basic accountability. How much of the $40 million you earned from loading up SVB with risk are you planning to return to FDIC?"

The most specific questioning on compensation during Tuesday’s hearing came from Senator Bob Menendez, who noted that there were roughly 30 outstanding supervisory matters that were still unresolved on the day of the bank’s failure.

Given those supervisory matters, which were confidential at the time, Menendez wanted to know if Becker believed he felt he was in possession of information that the public did not have when he sold stock in late February of this year.

“The question is, is that material information or not,” Menendez said.

Becker replied, “I didn't believe it was, sir.”

'You put all of your eggs in one basket'

The other main line of questioning that emerged Tuesday was Becker’s culpability in the bank’s downfall.

The former CEO repeatedly attributed the collapse to events beyond his control, citing an aggressive series of interest rate hikes by the Federal Reserve, rumors fomented by social media and a vicious bank run.

He said the bank felt like it had ample liquidity but it wasn’t prepared for the “anomaly” that transpired on March 9 and March 10 as customers spooked about the fall of a crypto-focused lender named Silvergate Bank turned their attention to Silicon Valley Bank.

Depositors pulled $42 billion from the Santa Clara, Calif.-based institution in one day and asked to pull another $100 billion the day the lender was seized by regulators. The previous largest bank run in US history, Becker said in his testimony, was $19 billion in deposits over the course of 16 days.

“There were a series of…unprecedented events that occurred led us to where we are today,” he said.

Several senators pushed back against this explanation, saying that the bank took on too much interest rate risk by purchasing loads of bonds when rates were low and then did not adequately address warnings from regulators.

The Fed's rate increases lowered the value of Silicon Valley Bank's securities, forcing it to sell assets at a loss once depositors began pulling their money. That sale, which it disclosed on March 8, contributed to doubt and panic among depositors and investors.

“You made a really stupid bet that went bad," said Senator John Kennedy. He added: "This was bone deep down to the marrow stupid. You put all your eggs in one basket, and unless you were living on the international space station, you could see that interest rates were rising."

Senator Sherrod Brown, chairman of the committee, told Becker at the beginning of Tuesday's hearing that "your version of events...sounds a lot like the dog ate my homework."

At the of the hearing, Brown came back around to the same point: "You have blamed pretty much everyone else."

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