When asked in a Senate hearing this week who was to blame for the demise of Silicon Valley Bank, the lender’s former chief executive, Greg Becker, had plenty of ideas, blaming regulators, the bank’s board and its own customers for bringing it down.
On Thursday, senior officials from two of the bank’s main regulators, the Federal Reserve and the Federal Deposit Insurance Corporation, told members of the same Senate panel that some of the impressions Mr. Becker had left lawmakers with were false.
The contradictory congressional testimony threatened to pose yet another problem for Mr. Becker, who is facing an investigation by federal criminal prosecutors into his handling of the failed California lender as well as a shareholder lawsuit accusing him and another senior leader of misleading investors about the bank’s health in the lead-up to its failure.
James N. Kramer, a lawyer for Mr. Becker, said Mr. Becker stood by the statements he had made.
The regulators’ statements were part of a hearing held by the Senate Banking Committee on how bank oversight should look in the future in light of the failures of three regional banks this spring. It came two days after Mr. Becker appeared alongside former senior leaders of Signature Bank, a New York lender that collapsed just after Silicon Valley Bank did and prompted the federal government to take drastic steps to prevent widespread panic in the banking system.
Senators on Thursday asked the regulators in charge of overseeing Silicon Valley Bank about two exchanges Mr. Becker had with committee members earlier in the week. In one, Mr. Becker seemed to claim his bank had fixed all but one of its problems well before it failed. In the other, he appeared to say that he had been shut out of the process of finding a buyer for Silicon Valley Bank after it had failed.
During the first exchange on Tuesday, Senator Thom Tillis, Republican of North Carolina, asked Mr. Becker to describe how his bank had responded to problems regulators had flagged in its risk management practices. Mr. Tillis brought up a list of items regulators referred to as “matters requiring attention” and asked Mr. Becker to describe how they were handled.
“We were working on them aggressively,” Mr. Becker said. “To my memory, by the middle of ’22, the vast majority of those findings had already been remediated. And, I believe, even in early ’23 my recollection is there was roughly one of those findings that were outstanding so the team again from my standpoint was very responsive to the regulatory feedback.”
On Thursday, Senator Mike Rounds, Republican of North Dakota, asked the Fed’s vice chair for supervision, Michael Barr, whether the problems really had been fixed. Mr. Barr said that they had not.
Mr. Becker “told this committee that they took care of all the problems,” Senator Jon Tester, Democrat of Montana, said in an exchange with Mr. Barr.
To that, Mr. Kramer responded, “Mr. Becker was referring to feedback he received from the internal team at SVB” and had never meant to suggest that regulators had signed off on the completion of the matters.
Also at issue was whether Mr. Becker had been able to help find a buyer for his failed bank. In his written testimony to the committee, Mr. Becker said he had “made every effort to ensure that SVB’s customers and employees would be protected, and worked to minimize, or eliminate, any loses that might result from the F.D.I.C.’s takeover of SVB.”
“This included seeking to engage potential acquirers, which I believed may have minimized the financial burden of the F.D.I.C.’s takeover and would have protected SVB’s employees,” he said.
On Tuesday, Senator Bill Hagerty, Republican of Tennessee, asked Mr. Becker whether federal authorities had let him help find a buyer for the failed bank.
“I offered several times to engage potential acquirers,” Mr. Becker told Mr. Hagerty.
“Did they ever consult you? You said you offered, but did the F.D.I.C. consult with you?” Mr. Hagerty asked.
“They did not,” Mr. Becker replied.
On Thursday, Mr. Hagerty asked regulators whether that was true.
“It’s my understanding that F.D.I.C. staff actually did meet with Mr. Becker on I believe it was the Saturday to get input from him,” said chairman of the F.D.I.C., Martin Gruenberg, who added that staff members “got input from him on potential acquirers of the institution.”
“Interesting,” Mr. Hagerty replied. “That’s contrary to what he said.”
“He stands by his testimony that they did not consult with him,” Mr. Kramer said.
The hearing came a month after federal regulators released reports that laid out the roots of the problems at Silicon Valley Bank and Signature Bank and the acknowledged regulatory lapses that allowed those problems to fester. The regulators said that both banks were poorly managed and were unprepared for the risks associated with rising interest rates, but noted the Federal Reserve and the F.D.I.C. were too slow in responding to red flags.
Republicans on the committee pushed the regulators for answers and in some cases accused them of blaming the Trump administration’s loosening of bank regulations for causing the recent turmoil.
Senator John Kennedy, Republican of Louisiana, accused Mr. Barr for seeking more authority to regulate banks after failing to successfully safeguard the banking system.
Mr. Barr insisted that he was seeking no new powers and, in fact, was committing to doing a better job.
“I am not seeking any additional authority or power or money from this committee,” Mr. Barr said. “We are going to use our existing authority to strengthen supervision and regulation to make it less likely that this kind of event happens in the future.”
Source: New York Times
