Failed bank execs see blame everywhere, except in the mirror

New York CNN

Three former executives testified publicly before a Senate Committee on Tuesday, more than two months after Silicon Valley Bank's collapse and Signature Bank's financial meltdown triggered an earthquake.

The takeaway for these executives from watching their companies fall apart under their feet is: "Everyone screwed up except us."

The Senate Banking Committee was unusually united by their disdain for how the three men -- Greg Becker, Scott Shay, and Eric Howell -- failed to minimize risks and collected millions of dollars in compensation as their banks collapsed.

The senators' grilling lasted just under two hours. As part of the semi-annual requirement, the Fed's top bank watchdog, along with several other regulators, was also in Washington. The banking crisis was a topic that came up.

The key takeaways of the Senate hearing

Everybody else has messed up

The executives were masters at deflecting the blame for the failures of their banks.

Becker claims that Silicon Valley Bank suffered from a combination of unprecedented Federal Reserve rate hikes, bad press, and social media panic.

Becker, in his testimony, said that he was "truly sorry" for the collapse of the bank, and blamed a "series unprecedented events."

He said that SVB was compared to Silvergate, a Southern California crypto-focused lender that announced their liquidation just days before SVB's collapse. Investors and news reports had wrongly grouped the two banks.

Becker, a member of the House Financial Services Committee, told lawmakers that rumours and misconceptions were spread online quickly, causing the bank run.

Becker explains that the Fed has raised interest rates faster and higher than they expected, despite the fact that inflation was only supposed to be temporary.

Did the CEO of the Bank do anything wrong to cause its instabilities? Becker replied that he could not think of any.

The lawmakers were shocked.

Sherrod brown, a Democrat senator from Ohio, said: "It's like my dog ate all my homework."

ICYMI, last month, Federal Reserve's autopsy reported called SVB's failed as a "textbook case" of mismanagement. It also admitted its own supervisory deficiencies.

How many different ways can you say'stupid?'

Hearings of this kind are notorious for their ostentation, but on Tuesday lawmakers made a real meal out of it.

The outrage was palpable, irrespective of the party.

On the right:

John Kennedy, Republican Senator, said that this was a 'bone-deep stupidity'. Tim Scott, Republican Senator from South Carolina, said: 'I am shocked by the complete neglect and disregard of the economic realities this country faced under your leadership.

From the left:

Brown, the chair of the banking committee, said: "Mr. Elizabeth Warren, former Signature chairman Shay quipped to her: "Your opinion about what constitutes a responsible managed bank...is...laughable."

Senators concentrate on compensation

The issue of executive compensation has been a persistent one.

SVB was still dealing with 31 supervisory warnings that were not resolved at the time of collapse. Becker received a $1.5m bonus as part his compensation package for 2022.

Sen. Warren focused on the issue of pay, asking Becker and Shay if they planned to return any of billions of dollars the failure of their banks cost the Deposit Insurance Fund. Spoiler alert! Becker did not commit to return any money, and Shay stated that he has no intention of doing so.

Right now, the law states that people such as Mr. Becker or Mr. Shay are allowed to come to Washington and lobby for weaker banking regulations. They can also load their banks up with risk and pay themselves tens and millions of dollars. And when the banks go bust, Mr. Becker or Mr. Shay keep the entire money. This is just plain wrong.