CEO of collapsed Silicon Valley Bank successfully lobbied Congress to avoid imposing extra scrutiny

The president of Silicon Valley Bank appeared before Congress in 2015 to argue that his bank should not be subject to scrutiny, insisting that “enhanced prudential standards” should be lifted “given the low risk profile of our activities.”

Greg Becker, the chairman of SVB, watched his bank collapse and come under government control on Friday, becoming the second-biggest bank to fail, after Washington Mutual in 2008.

However, hours later it emerged that Becker had convinced Congress to lessen scrutiny of companies like his.

He had also sold $3.57 million worth of shares in a pre-planned automatic liquidation two weeks before the bank collapsed, with the CFO dumping $575,000 the same day.

A person from inside Silicon Valley Bank, center rear, talks to people waiting outside the Silicon Valley Bank entrance in Santa Clara, California, on Friday.

Becker sold 12,451 shares at an average price of $287.42 each on February 27.

The price plunged to just $39.49 before trading on Friday before the FDIC seized the bank’s assets. It closed at $15.

Federal records obtained by The lever it showed that Becker had spent more than half a million dollars on federal lobbying in 2015-18.

The money was well spent: SVB got the light regulation it wanted.

Becker told Congress about “SVB’s deep understanding of the markets it serves, our strong risk management practices.”

He argued his bank would soon hit $50 billion in assets, which the law says would trigger “enhanced prudential standards” including tougher regulations, stress tests and capital requirements for it and other banks of 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, SVB will likely need to divert significant resources from providing finance to job-creating companies in the innovation economy to meet enhanced prudential standards and other requirements,” Becker said.

“Given the low risk profile of our activities and business model, such an outcome would stifle our ability to extend credit to our customers without any significant corresponding reduction in risk.”

The lobbying paid off in 2019.

The Federal Reserve proposed regulations to implement the deregulation act, despite warnings from financial watchdogs that its regulations on Category IV institutions, as SVBs were later classified due to their size and other risk factors They were too weak.

“The proposal to significantly weaken enhanced prudential standards for Category IV companies could be disastrous,” Better Markets, a nonprofit organization that advocates for tougher financial regulations, wrote in a commentary on the Federal Reserve proposal.

‘Also, these are not small or insignificant companies. Remember that the smallest among 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, as of December 2022, SVB had $209 billion in assets under management, keeping it below the $250 billion threshold the bank had lobbied for. .

Greg Becker (left) sold 12,451 shares at an average price of $287.42 each on February 27. SVB CFO Daniel Beck (right) sold 2,000 shares at $287.59 each on the same day as his boss. The price plunged to just $39.49 before trading on Friday before the Federal Deposit Insurance Corporation (FDIC) seized its assets.

Greg Becker sold 12,451 shares at an average price of $287.42 each on February 27. The price plunged to just $39.49 on the Friday before trading before the Federal Deposit Insurance Corporation seized its assets.

There is no suggestion of impropriety by Becker or Beck.

Little known to the general public, SVB specialized in financing start-ups and had become the 16th largest bank in the US by assets: at the end of 2022, it had $209 billion in assets and approximately $175, 4 billion in deposits.

Its demise represents not only the largest bank failure since Washington Mutual in 2008, but also the second largest bankruptcy in the history of a retail bank in the United States.

In response to the sudden collapse, Treasury Secretary Janet Yellen called an emergency meeting of the top US banking regulators.

“Secretary Yellen expressed full confidence in banking regulators to take appropriate action in response, noting that the banking system remains resilient and regulators have effective tools to address these types of events,” a Treasury statement said.

Based in the shadow of the world’s biggest tech companies, SVB’s woes have raised fears that more banks could face ruin as the fallout from high inflation and rising interest rates squeeze weaker lenders. .

A Brinks security truck is parked outside the Silicon Valley Bank in Santa Clara as investors line up outside after the bank closed its doors. The Federal Deposit Insurance Corporation (FDIC) seized SVB’s assets today as depositors, mostly tech workers and start-ups, began withdrawing their money following the shock announcement of a loss of $1.8 billion.

Police were called after “about a dozen” financiers, including former Lyft executive Dor Levi, showed up in front of the Park Avenue building when a bank run forced the Federal Deposit Insurance Corporation to seize their assets. active on Friday morning. SVB blocked their entrance and two police cars arrived to tell the investors to get out of the building.

Two police cars arrived at the Park Avenue bank branch today after investors frantically arrived trying to get their money out.