Silicon Valley Bank failed on March 10, 2023. Signature Bank was seized two days later. First Republic went to the FDIC on May 1. On May 17, Gregory Becker of Silicon Valley Bank, Scott Shay of Signature, and Michael Roffler of First Republic appeared together before two House subcommittees. The chairman opened by going down the table and asking each one the same question.
Going down the line
HuizengaI appreciate the witnesses being here, and your candor. I am going to ask you what I think are kind of two of the most important questions, frankly, and go down the line asking you this. The first is whether you take responsibility for the failure of your bank. Mr. Becker?
BeckerCongressman, as CEO, I think you have to take responsibility for the ultimate outcome of your institution.
HuizengaOkay. I appreciate that. Mr. Shay?
ShayAs the chairman of the board, I think I did a responsible role throughout to fulfill my duties.
HuizengaJust a second. Do you accept the responsibility for the failure or do you believe it was----
ShayI am very sorry. I am sorry that the bank was seized by the regulators.
HuizengaI bet your depositors are, too.
HuizengaOkay. I will take that as a, no. Mr. Roffler?
RofflerMr. Chairman, this was an event that is unforeseeable when it happens, and the contagion spread very quickly and panic is very hard to control. What I feel responsible for is for our colleagues each and every day and our clients each and every day to make sure they are taken care of and supported during this time.
HuizengaThat also sounds like a, no. So congratulations, Mr. Becker, you are the only one to man up and actually take responsibility for that, so I will start with you.
BeckerCongressman, that is a question to the point made earlier by Congressman Foster. I have thought about that a lot over the last several months. And when you look back with hindsight at what could have been done differently, I think it is very challenging because when you go back and make decisions, you have to go back and look at the facts that you had.
[Hearing transcript, May 17, 2023, opening question round.]
What they sold
PoseyOkay. Mr. Becker, did you sell, convert, or otherwise affect any of your stock in the 12 months preceding?
BeckerI didn't sell any stock in 2022. And in 2023, after our earnings release, after it was reviewed by our Legal Team and myself that I didn't have inside information, we put a Rule 10b5-1 plan in place in January, and that was sold with expiring stock options from 2016.
PoseyWhat was the approximate value at the time?
BeckerThe gross amount was $3.6 million.
[Hearing transcript, May 17, 2023, questioning by Rep. Posey.]
The bonus
Representative Sherman had spent his opening minutes tracing how lengthening the duration of the bank’s securities portfolio, and cutting its hedges from 56 percent of the portfolio to 2 percent, raised reported income. Then he turned to what that income paid for.
ShermanMr. Becker, you have said you take responsibility for the collapse of your bank. Are you willing to return the bonus that you got the day before the bank failed and that you then took on your Hawaiian vacation?
BeckerCongressman, as I said earlier, I plan to cooperate with the process----
ShermanWill you do it voluntarily or only if the government forces you to?
BeckerCongressman, I will cooperate with the process.
ShermanCooperate. That means only if the government forces you to.
ShermanAnd will you return that portion of the bonus attributable to the money you saved by throwing away your flood insurance as it began to rain, or cashing it in and not having hedges and credit default swaps on your portfolio? Will you return that part of the bonus? Not voluntarily.
BeckerI will cooperate with the process.
[Hearing transcript, May 17, 2023, questioning by Rep. Sherman.]