Ohio lawmakers press former heads of failed banks

WASHINGTON, D.C. – The former heads of Silicon Valley Bank and Signature Bank faced Congress on Tuesday for the first time since their businesses went under two months ago.

“At the outset, I want to be clear that I never envisioned myself or SVB being in this situation,” Gregory Becker, the former CEO of Silicon Valley Bank, testified.

He told lawmakers on the Senate Banking and Housing Committee that he was shocked when the bank collapsed in March. Becker, and the former head of Signature Bank who spoke alongside him, described to members that business was good until a first-of-its-kind bank run fueled by social media posts.

“Le​​ading to $42 billion in deposits being withdrawn from SVB in 10 hours, or roughly $1 million every second,” Becker said.

Scott Shay, the former Signature Bank chairman, added, “And then, within just a few hours, our depositors withdrew $16 billion from the bank.”

Lawmakers did not feel sorry for the company heads.

Ohio Sen. JD Vance (R) pointed out that Becker sold $3.5 million worth of stock just two weeks before the collapse, something Becker said was set up legally in January.

“Did you have any idea, two weeks before, when you sold the stock publicly that something was amiss at your own bank? That you were weeks away from being placed into receivership by the FDIC [Federal Deposit Insurance Corporation?” Vance asked.

“No, I did not,” Becker replied.

Silicon Valley Bank had large bond holdings, which fell in value as interest rates soared, triggering panic by depositors. The bank’s collapse led to Signature Bank’s failure days later.

Ohio Sen. Sherrod Brown, the Democratic chair of the Banking Committee, hosted Tuesday’s hearing as Congress weighs what it could do to avoid future bank failures.

“We need stronger rules in place and we need bank regulators and auditors that are enforcing those rules,” Brown told Spectrum News back on May 4.

Similar hearings are playing out in the U.S. House.

In a hearing last week, Ohio Rep. Joyce Beatty, a Democrat who represents Columbus, zeroed in on potential policy changes to protect small businesses that rely on banks. 

“Do you think Congress should focus on expanding coverage to small business payment accounts?” she asked a panel of witnesses.

Thomas Michaud, president and CEO of Keefe, Bruyette & Woods (KBW), replied, “I 100% agree. I think the targeted approach is the right approach and I think that is the right cohort to focus on.”

In a separate hearing on Tuesday, Ohio Rep. Warren Davidson (R) said this to a panel of financial regulators: “It wasn’t really a failure of the regulation itself, it was a failure of the regulators to actually take action on what they may have observed.”

There’s bipartisan frustration over the bank leaders receiving huge bonuses in the lead up to the banks’ failures, but there’s a debate about whether bank management or federal regulators – and regulations – are to blame.

Spectrum News asked Sen. Vance about it on Tuesday.

“I don’t think you have to choose one or the other. Clearly the bank’s management is clearly at fault. Clearly, the San Francisco Fed, with the particular case of SVB, fell asleep at the wheel,” he said. “And unfortunately, there’s an unholy alliance between the regulators sometimes and the biggest banks.”

The former bank leaders will testify before the House Financial Services Committee on Wednesday. 

This article was originally published by Spectrum News on May 16, 2023.