Sen. Elizabeth Warren (D-Mass.) is pressing Greg Becker, who was CEO of Silicon Valley Bank when it collapsed, for answers about his role in lobbying Congress to roll back banking safeguards in the 2010 Dodd-Frank Wall Street Reform Act, which some Democrats think later contributed to the 2nd biggest bank failure in U.S. history.
Warren noted in a March 14 letter to Becker that he submitted a statement to the Senate Banking Committee in 2015 “calling on Congress to reduce safety standards for ‘mid-sized’ banks like your own.”
She said Becker’s testimony to Congress misled lawmakers about the risks faced by Silicon Valley Bank, which were revealed over the past week as a liquidity crisis at the bank forced federal regulators to take it over. The bank had $209 billion in assets at the time of its collapse and federal regulators intervened after determining it posed a risk to the wider financial system.
“Despite your assurances to Congress that SVB was sufficiently protected from risk because of your various efforts, it is now clear that SVB was wholly unequipped to independently assess its business’s risk,” she wrote.
She noted that Silicon Valley Bank, which had $40 billion in assets in 2015, argued to Congress at the time that it did not present a systematic risk and claimed that it had hired additional “highly skilled risk professionals” and established an independent “Risk Committee” to safeguard against a failure.
Warren, however, pointed out that Silicon Valley Bank did not have a chief risk officer for eight months prior to its collapse last week and said it failed to address the risks posed by the concentration of its client base and rising interest rates, which she called “a failure of Banking 101.”
“Had SVB been subject to Dodd-Frank rules undone by” a 2018 banking deregulation law signed by then-President Trump, “the bank would have been required to maintain stronger liquidity and capital requirements and conduct regular stress tests that would have required SVB to shore up its business to weather the type of stress it experienced last week,” she wrote.
A Senate GOP aide who spoke to The Hill, however, questioned whether regulators would have discovered what the source described as a “liquidity mismatch” even if Trump never signed the Economic Growth, Regulatory Relief and Consumer Protection Act, which gave regulators more discretion about applying stress tests to mid-sized banks.
Warren also took aim at Becker’s compensation before federal regulators stepped in to avoid panic from spreading throughout the financial markets.
“SVB executives were doing just fine as the bank unraveled: you were awarded over $9.9 million in compensation last year, including a $1.5 million cash bonus, and you even paid out bonuses just hours before your bank was taken over by federal regulators,” Warren wrote.
“While you and company executives appear to have been successful in cashing out before the crash, SVB’s customers were not as lucky. Many depositors were unable to access their funds last week, leaving small businesses and nonprofits questioning how they were going to make payroll in time,” she wrote.
Warren concluded her letter by asking Becker to describe the full scope of his efforts to roll back Dodd-Frank regulations and to disclose how many meetings Silicon Valley Bank lobbyists had with lawmakers on the topic.
She also asked whether the bank contributed money to the American Bankers Association to help roll back the regulations and whether the board formally approved the lobbying efforts and expenses.
Biden on Monday said the managers of banks such as Silicon Valley Bank and Signature Bank taken over by federal regulators would be fired and stockholders in the bank would not have their losses covered.
Becker in a video message to bank employees last week acknowledged what he called the “incredibly difficult” situation and said, “I can’t imagine what was going through your head and wondering, you know, about your job, your future” as the bank collapsed.