Watch Live: 'Failed Bank' CEOs Explain To Congress Why It Wasn't Their Fault
Grab your popcorn...
Gregory Becker, the former CEO of Silicon Valley Bank (prepared remarks here), and Scott Shay (prepared remarks here) and Eric Howell (prepared remarks here), former senior executives for Signature Bank, will appear before the Senate Banking Committee this morning to explain that it wasn't their fault their banks collapsed... it was Russia, bloggers, short-sellers, The Fed, regulators, and/or probably Trump too somehow.
The hearing will mark the first time the former executives have spoken publicly since the March collapse of both firms, which helped set off broader turmoil in the banking sector.
Judging by Becker's prepared remarks, it's clear where this is going...
...on March 8, Silvergate Bank ("Silvergate") announced its intent to voluntarily wind down and liquidate, and depositors triggered a run on that bank. SVB and Silvergate were very different banks, as Silvergate was a nearly 100 percent crypto focused bank while SVB only had around 3 percent of its deposits from crypto clients. Despite these differences, SVB had been compared to Silvergate in a Financial Times article published on February 21, which provided negative commentary regarding Silvergate and SVB's securities portfolios.
Silvergate's failure and the link to SVB caused rumors and misconceptions to spread quickly online, leading to the start of what would become an unprecedented bank run.
The next day, the bank run picked up steam: By the end of the day on March 9, $42 billion in deposits were withdrawn from SVB in ten hours, or roughly $1 million every second.
As the bank run was ongoing, we were working to access additional liquidity when I was informed the morning of March 10 that the FDIC would be taking possession of SVB.
That day, another roughly $100 billion in deposits were requested to be withdrawn, bringing the total actual and requested deposit outflow to roughly $142 billion, or about 80 percent of total deposits, over two days.
To put the unprecedented velocity of this bank run in context, the previous largest bank run in U.S. history was $19 billion in deposits over the course of 16 days.'
I do not believe that any bank could survive a bank run of that velocity and magnitude, which was "far beyond historical precedents."
Finally, we note that four senators - two Democrats and two Republicans - have introduced legislation that would give the Federal Deposit Insurance Corporation authority to claw back any pay made to executives in the five years leading up to a bank’s failure.
The bill is sponsored by Warren, Josh Hawley, R-Mo., Catherine Cortez Masto, D-Nev. and Mike Braun, R-Ind. The White House, while not endorsing the specific bill, has called on Congress to pass laws to reform how bank CEOs are paid in the event of a failure.
“Bank executives who make risky investments with customers’ money shouldn’t be permitted to profit in the good times, and then avoid financial consequences when things go south,” Hawley said when the bill was introduced in late March.
Let's see how the CEOs react to that.
Watch live here (due to start at 10amET):
