SVB collapse: Warren demands accountability from Silicon Valley Bank CEO
Rachel Schilke
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Sen. Elizabeth Warren (D-MA) is demanding accountability and answers from Silicon Valley Bank CEO Greg Becker on the company’s efforts to roll back financial regulations prior to the collapse of the bank.
Silicon Valley Bank collapsed on March 10 after stocks began plummeting and venture capital firms had advised companies and clients to pull their money from the bank, leading to $42 billion withdrawn in a single day. By the end of the day on March 9, the bank had a $958 million negative cash balance, and its stock price had fallen about 60%.
SVB COLLAPSE: HERE’S EVERYTHING YOU NEED TO KNOW
Warren, like many Democrats, is blaming rolled-back policies from the Dodd-Frank Act during the Trump administration for the collapse. The Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2020, which also raised the threshold at which a bank is considered “systemically important” to $250 billion, which Warren said exempted Silicon Valley Bank from regular stress testing and risk management plans that could have prevented the collapse.
“You lobbied for weaker rules, got what you wanted, and used this opportunity to abdicate your basic responsibilities to your clients and the public — facilitating a near-economic disaster,” Warren said in her letter to Becker.
“There is much work to be done to understand the failure of SVB — and these efforts must start with understanding your role in the rollback of banking regulations that facilitated this failure,” she continued.
The Massachusetts senator claimed Becker and bank executives engaged in “intense lobbying” to roll back the measures and that the CEO said in 2015 the bank “does not present systemic risks.” However, the bank’s failure brought attention to a possible $620 billion hole in the banking 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,” Warren wrote. “SVB failed — while its Chief Risk Officer position sat vacant for eight months as its financial standing deteriorated — because it failed to address two key risks: concentration in your client base, and rising interest rates.”
Warren provided the CEO with eight questions, spanning from efforts to roll back policies to bonuses received or paid out over the last 10 years. She has requested that Becker responds by March 28.
“You have nobody to blame for the failure at your bank but yourself and your fellow executives,” Warren wrote.
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The Federal Reserve announced on Monday it had launched a review of the supervision and regulation of Silicon Valley Bank. The Justice Department and the Securities and Exchange Commission announced their own investigation into the collapse of the bank Tuesday.
The bank’s collapse is set to have a large impact on the Federal Reserve’s interest rate hike decision, which is planned for March 22.