Senators criticize ex-CEO of Silicon Valley Bank for payouts before bank’s downfall.

Senators Condemn SVB CEO for Bonuses and Stock Sales Before Bank’s Collapse

During a Senate Banking Committee hearing on Tuesday, senators criticized Silicon Valley Bank (SVB) CEO Greg Becker for his actions leading up to the bank’s collapse. Sen. J.D. Vance (R-Ohio) called out Becker for paying himself a $1.5 million cash bonus in 2022, despite the bank’s value declining by two-thirds. Becker also sold a significant amount of SVB stock shortly before the bank’s failure.

Committee chairman Sen. Sherrod Brown (D-Ohio) confronted Becker, stating that he was paying out bonuses until hours before regulators seized the bank’s assets. Brown emphasized that workers suffer the consequences while executives walk away unscathed, and he is working on a bill to empower regulators to reclaim compensation from failed bank executives.

Sen. Bob Menendez (D-N.J.) raised concerns about the Federal Reserve issuing over 30 supervisory warnings to SVB before its collapse, suggesting that Becker may have engaged in insider trading by relying on non-public information. Becker claimed that he regularly sold shares as part of his compensation plan and was unaware of SVB’s impending troubles when he arranged the sale.

Senators also criticized SVB for its rapid growth and compensation policies that rewarded executives for taking on excessive risks without hedging against the risk of rising interest rates. Sen. John Kennedy (R-La.) pointed out that SVB placed all its bets in one basket and failed to purchase hedges that could have impacted profits and bonuses.

Impact on Regional Banks

SVB’s collapse sparked a crisis of confidence in banks and compelled regulators to safeguard all of SVB’s uninsured deposits to prevent further bank failures. Since March, three out of the four largest bank failures in the United States have occurred. Most recently, First Republic Bank became a casualty resulting from SVB’s collapse when regulators shut down the San Francisco-based regional lender and orchestrated its sale to JPMorgan Chase.

Regional banks, which play a vital role as lenders to local businesses, continue to struggle with the cost of high-interest rates. Senators are directing their scrutiny toward Becker due to the collapse of SVB, and they are determined to prevent this pattern from repeating.