The SVB Collapse: 48 Hours That Broke a Bank

Greg Becker, SVB CEOWe have taken decisive actions to strengthen our financial position. We sold substantially all of our available-for-sale securities portfolio, and we are pursuing a $2.25 billion capital raise. We are confident in our ability to execute this plan and remain well-capitalized.

Venture capital investor, text messageIs this a joke? You just sold your entire AFS book at a $1.8 billion loss and you're telling us to stay calm?

BeckerI know this is unexpected. But I want to be clear: we have the liquidity to meet all client needs. I'm asking everyone to stay calm. This is not a panic. We have been a trusted partner to the innovation economy for 40 years.

BeckerI want to address the concerns directly. We are not in trouble. We have the capital. We have the liquidity. The portfolio sale was a strategic repositioning, not a distress sale. I need you to understand that.

Peter Thiel, Founders FundGreg, I appreciate the call. But I need to ask directly: should our portfolio companies be moving their deposits? Yes or no?

BeckerPeter, I can't tell you what to do with your portfolio companies. What I can tell you is that SVB is solvent. Our capital ratios are strong. The deposit base is stable.

ThielThat's not a yes or no, Greg.

BeckerI'm telling you the facts. The bank is solvent. The raise will close. I need your support.

FDIC examinerMr. Becker, we need to see the deposit outflow numbers for the last 24 hours. In real time, please.

BeckerThey're unprecedented. We've never seen anything like this. $42 billion in attempted withdrawals in a single day. That's a quarter of our total deposits. In one day.

FDIC examinerAnd how much of that did you actually process?

BeckerWe processed what we could. The system was overwhelmed. We had to queue transactions. But the queue is still growing. We're losing control of it.

FDIC examinerAt this rate, you'll be negative by close of business. You understand what that means.

BeckerI understand. But we have a solution. The capital raise is still in progress. If we can just get through the weekend, if we can get the regulators to give us a bridge, we can survive this.

FDIC examinerGreg, the regulators are not going to give you a bridge. The State of California just closed you. We're taking possession of the bank effective immediately.

Senator Sherrod BrownMr. Becker, you sold $21 billion of securities at a loss on March 8. You were trying to raise capital. But you didn't tell your own risk committee. You didn't have a chief risk officer for eight months. And you personally lobbied Congress to weaken regulations that would have prevented this collapse. Is that correct?

BeckerSenator, I want to address each of those points. The decision to sell the securities was made by management with the board's knowledge. We believed the capital raise would succeed. We had every reason to believe that.

BrownYou had every reason to believe it would succeed, and yet 48 hours later the bank was closed. The American people are now on the hook because of your mismanagement. Do you take responsibility for that?

BeckerSenator, I take full responsibility for the decisions I made. I am deeply sorry. I devoted my entire career to SVB. The last 48 hours of the bank were the most devastating of my professional life. But I also want to say that the speed of the run, the unprecedented velocity of social media-driven deposit flight, was something no bank could have withstood.

BrownNo bank could have withstood it because you lobbied to remove the very safeguards that would have protected you. You came to this committee. You asked us to roll back the rules. And we did. And now here we are.

Senator Elizabeth WarrenMr. Becker, in the two years before the bank failed, you were paid approximately $20 million. You sold $3.6 million of SVB stock in the weeks before the collapse. Meanwhile, the bank's risk management was hollowed out. You had no chief risk officer. The Fed identified serious deficiencies and you did nothing. Do you believe you should return that compensation?

BeckerSenator, the stock sales were made under a pre-existing 10b5-1 plan. They were not discretionary. As for compensation, the board sets compensation. I believe I acted in good faith throughout my tenure.

WarrenYou acted in good faith while the bank was careening toward a cliff and you were selling stock and taking home millions. The American people are covering the depositors. The venture capitalists who pulled their money out are fine. The executives who got bonuses are fine. And the workers at the tech companies who banked with you are terrified. Do you see the problem here?

BeckerSenator, I see the problem. I regret the outcome. But I want to be clear: I did not sell stock based on inside information. I did not personally benefit from the bank's failure. I lost my job. I lost my career. I lost everything I built.

WarrenYou lost your job. The people who banked with you lost their payroll accounts. Those are not the same thing, Mr. Becker.

Michael Barr, Fed Vice Chair for SupervisionSVB's failure is a textbook case of mismanagement. The bank's management failed to manage its interest rate risk. Its board failed to oversee management. And Federal Reserve supervisors failed to take forceful enough action. All three things are true.

ReporterYou're saying the Fed failed too?

BarrI'm saying the supervisory warnings were issued but not escalated. The bank was rated satisfactory as recently as August 2022, even though supervisors had identified serious deficiencies. The transition from identifying a problem to demanding a fix was too slow. That is on us.

ReporterAnd the rollback of Dodd-Frank regulations in 2018? Did that contribute?

BarrThe 2018 law raised the threshold for enhanced prudential standards from $50 billion to $250 billion. SVB was below that threshold. But I want to be clear: even if the stricter rules had applied, they would not have prevented the fundamental issue here, which was a bank with a concentrated deposit base, massive unhedged interest rate risk, and management that failed to act. The run was a symptom. The disease was the balance sheet.