The CEO of the collapsed Silicon Valley Bank successfully lobbied Congress to avoid additional scrutiny
The president of Silicon Valley Bank appeared before Congress in 2015 to argue that his bank should not be subject to scrutiny – urging that “enhanced prudential standards” be lifted “given the low risk profile of our business.”
Greg Becker, president of the SVB, saw on Friday how his bank collapsed and came under government control.
But hours later, it emerged that Becker had persuaded Congress to reduce scrutiny of companies like his. But anyone with deposits in excess of a quarter of a million dollars at Silicon Valley Bank now faces losing all their money above $250,000 protected by a federal law.
Becker had also sold $3.57 million worth of stock in a pre-planned, automated sell-off two weeks before the bank collapsed — and the CFO closed out $575,000 the same day.
Greg Becker, president of the SVB, lobbied Congress in 2015 to reduce oversight of his bank
A person from inside Silicon Valley Bank, center back, talks to people waiting outside an entrance to Silicon Valley Bank in Santa Clara, California, on Friday
Becker sold 12,451 shares on Feb. 27 at an average price of $287.42 each.
The price plummeted to just $39.49 in premarket on Friday before the Federal Deposit Insurance Corporation (FDIC) seized the bank’s assets. It closed at $15.
Federal data obtained by The lever showed that Becker had spent more than half a million dollars on federal lobbying in 2015-2018.
The money was well spent: the SVB got the light regulation it wanted.
Becker told Congress about “SVB’s deep knowledge of the markets it serves, our strong risk management practices.”
He argued that his bank would soon reach $50 billion in assets, which the law said would lead to “enhanced prudential standards,” including stricter regulation, stress testing and capital requirements for his and other banks of a similar size.
The financier, who joined the company three decades ago as a loan officer, told Congress that $250 billion was a more appropriate threshold.
“Without such changes, the SVB will likely need to free up significant resources from providing finance to job-creating companies in the innovation economy to meeting improved prudential standards and other requirements,” said Becker.
“Given the low risk profile of our business and business model, such an outcome would choke our ability to extend credit to our customers without any corresponding significant reduction in risk.”
The lobby paid off in 2019.
The Federal Reserve proposed regulations to implement the deregulation bill — despite warnings from financial watchdogs that its regulation of Category IV institutions — as SVB was later classified due to its size and other risk factors — was far too weak.
“The proposal to significantly weaken enhanced prudential standards for Category IV companies could be disastrous,” Better Markets, a nonprofit advocating for tighter financial regulation, wrote in commenting on the Federal Reserve’s proposal.
‘Moreover, these are not small or insignificant companies. Consider that the smallest of this class of banks is more than twice the size of the $50 billion banks that automatically required enhanced prudential regulation under the Dodd-Frank Act as originally enacted.”
A Friday press release from the Federal Deposit Insurance Corporation noted that SVB had $209 billion in assets under management as of December 2022, putting it below the $250 billion threshold the bank had been lobbying for.
Greg Becker (left) sold 12,451 shares on Feb. 27 at an average price of $287.42 per share. SVB’s CFO Daniel Beck (right) sold 2,000 shares at $287.59 per share on the same day as his boss. The price fell to just $39.49 in premarket Friday before the Federal Deposit Insurance Corporation (FDIC) seized its assets.
Greg Becker sold 12,451 shares on February 27 at an average price of $287.42 each.
There is no suggestion of any impropriety by Becker or Beck.
Little known to the general public, SVB specialized in financing start-ups and had become the 16th largest US bank by assets: by the end of 2022, it had $209 billion in assets and approximately $175.4 billion in deposits.
Its demise not only represents the largest bank failure since Washington Mutual in 2008, but also the second-largest ever for a retail bank in the United States.
In response to the sudden collapse, Treasury Secretary Janet Yellen called an emergency meeting of major US banking regulators.
“Secretary Yellen expressed full confidence in banking regulators to take appropriate action, noting that the banking system remains resilient and that regulators have effective tools to deal with such events,” the Treasury Department said in a statement.
Located in the shadow of the world’s largest tech companies, SVB’s travails have raised fears that more banks will face collapse as the fallout from high inflation and elevated interest rates strain weaker lenders.
A Brinks security truck is parked in front of the Silicon Valley Bank in Santa Clara as investors line up outside after the bank closes. The Federal Deposit Insurance Corporation (FDIC) seized SVB’s assets today as depositors – mostly tech workers and start-ups – began withdrawing their money after the shock announcement of a $1.8 billion loss
Police were called after “about a dozen” financiers, including former Lyft executive Dor Levi, showed up outside the Park Avenue building as a run on the bank Friday morning forced the Federal Deposit Insurance Corporation to seize its assets. SVB blocked their entry and two police cars arrived to tell the investors to leave the building.
Two police cars drove to the Park Avenue bank branch today after investors frantically arrived to get their money out