At Hearing, Warren Blasts Former SVB and Signature Bank CEOs for Keeping Millions After Recklessly Crashing Banks
Warren Calls on Banking Committee to Take Action on Her Bipartisan Bill to Claw Back Compensation from Failed Bank Executives
Video of Hearing Exchange (YouTube)
Washington, D.C. – At a hearing of the Senate Banking, Housing, and Urban Affairs Committee, U.S. Senator Elizabeth Warren (D-Mass.) blasted the former CEOs of Silicon Valley Bank (SVB) and Signature Bank (Signature) for lobbying Congress to weaken banking regulations, loading up their banks with risk, ignoring regulators’ warnings, and crashing their banks – all while keeping their multi-million dollar paychecks.
Senator Warren highlighted that Gregory Becker, SVB’s former CEO, collected almost $40 million in compensation between 2019 and 2023, even as SVB had warnings of 31 unresolved supervisory issues from the Federal Reserve when it collapsed in March. Scott Shay, former Chairman and Co-Founder of Signature Bank, made more than $20 million from 2019 to 2023 as the Federal Deposit Insurance Corporation (FDIC) identified 45 liquidity risk issues. Senator Warren noted that SVB and Signature’s collapses cost the FDIC’s Deposit Insurance Fund $20 billion and $2.5 billion, respectively, but neither executive committed to paying back any of this money from the millions they made.
Senator Warren stressed the importance of holding bank executives accountable for cashing in after loading their banks up with risk, and called on the Banking Committee to schedule a vote for her bipartisan Failed Bank Executives Clawback Act – legislation that would require that, in the event of a bank failure, federal regulators claw back all or part of the compensation received by bank executive in the five-year period preceding the failure.
Transcript: Examining the Failures of Silicon Valley Bank and Signature Bank
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Tuesday, May 16, 2023
Senator Elizabeth Warren: You know the last time this committee received testimony from Mr. Becker, the CEO of Silicon Valley Bank, he was lobbying Congress, us, to do away with the Dodd-Frank rules designed to protect our nation's banking system. Now, unfortunately, too many people in Congress listened. And now here we are, three bank collapses later, picking up the pieces of Mr. Becker's successful efforts at deregulation.
In recent reviews of the failures of SVB and Signature Bank, regulators found that weakened bank rules helped cause this crisis. They also found that each of the witnesses here today were repeatedly warned that their extreme risk-taking was dangerous. Now, instead of paying attention to those warnings, Mr. Becker, Mr. Shay, and and Mr. Howell took on more risks so they could boost their own paychecks.
Mr. Becker, you were SVB’s CEO from 2011 until it failed in March. In 2019, the year after Congress gave you what you wanted and voted to weaken the banking system’s guardrails, you got a 35% pay bump, not not bad for a single year. In fact, your pay increased by nearly $3 million. Now that same year that you got the pay bump, nearly five years ago now, how many active supervisory issues had the Fed identified and warned your bank about?
Gregory W. Becker, Former CEO, Silicon Valley Bank: Senator, I don't I don't recall the specific number that we would have had in 2019.
Senator Warren: Well, you ran the bank Mr. Becker, do you want to take a guess? One, two, a dozen?
Mr. Becker: I would guess it would be in the ten to fifteen.
Senator Warren: Seventeen, seventeen. Same year you got a $10 million paycheck, the Fed had warned SVB of seventeen unresolved supervisory issues. Now your bank had issues with capital planning, it had issues with liquidity risk management, and the bulk of the issues identified by the Fed focused on weak governance. It was a litany of management failures.
By the time SVB failed more than four years later, it had 31 unresolved, that's what the public record shows, 31 unresolved supervisory issues. But the big paychecks for you kept rolling in during that four year period, you collected almost $40 million.
Mr. Becker, the collapse of your bank cost the FDIC fund about $20 billion. Money that someone is going to have to make up: big banks, community banks, depositors, consumers, somebody. So I want to know about basic accountability. How much of the $40 million that you earned from loading up SVB bank with risk are you planning to return to the FDIC?
Mr. Becker: Senator, if I could clarify one point and then I'll answer your, your, your question. Compensation, I know there's been a lot of discussion about is it long term or short term, and it's short-term focused–
Senator Warren: I have a very simple question. You cost the FDIC fund $20 billion, you made $400 million doing that. How much are you planning to return to the fund?
Mr. Becker: You Senator, I disagree with the number you just quoted, but–
Senator Warren: What, that’s not your paycheck, or it's not how much it cost the FDIC? Those are both a matter of public record. How much are you planning to return to the fund?
Mr. Becker: Senator, the number you just quoted was $400 million.
Senator Warren: $40 million, sorry, $40 million.
Mr. Becker: I was disagreeing with that.
Senator Warren: How much of the $40 million are you planning to return? How many times are we going to do this dance?
Mr. Becker: Senator, I promise to cooperate with the regulators as they do a review–
Senator Warren: Are you planning to return a single nickel to what you cost the fund?
Mr. Becker: Senator, I know there's going to be a process review of compensation–
Senator Warren: I'll take that as a no.
All right. So let's turn to our next one, Mr. Shay. Mr. Shay, Signature Bank’s leadership was right there with Mr. Becker. Mr. Shay , you were the Chair of Signature’s board for the entirety of its 22 year existence. I understand you were also the Chair of the Risk Committee for 22 years. So let me ask you, in 2019, once Congress weakened the laws, how many formal warnings from the FDIC about your bank's liquidity risk management issues were outstanding?
Scott A. Shay, Former Chairman and Co-Founder, Signature Bank: (inaudible).
Senator Warren: Don’t know? Does the number eighteen sound right?
Mr. Shay: Yes.
Senator Warren: Yeah, okay. In fact, you were still Chair of the Risk Committee in 2020, 2021, and 2022 when Signature received more warnings from the FDIC and quote, “never adequately addressed the liquidity risk management concerns.”
So from 2019 to 2023, while the FDIC identified an additional 45 liquidity risk issues, you racked up more than $20 million in pay. So, Mr. Shay, the collapse of your bank cost the FDIC fund two and a half billion dollars. So how much of the $20 million that you earned from loading up Signature Bank with risk are you planning to return to the FDIC?
Mr. Shay: I believe that Signature Bank was a responsibly-managed to bank solvent until the end–
Senator Warren: I'm sorry, your opinion on what is a responsibly managed bank is now laughable.
Mr. Shay: And the answer is no.
Senator Warren: So you’re planning to return how much?
Mr. Shay: The answer is–
Senator Warren: None.
Mr. Shay: I am not planning to do so, no.
Senator Warren: Okay, so here's the thing. Right now, the law says that people like Mr. Becker and Mr. Shay can come to Washington, they can lobby for weaker bank regulations, they can load up their banks with risk , they can pay themselves tens of millions of dollars in bonuses and stock options, and when the banks blow up, Mr. Becker and Mr. Shay get to keep all the money. And that is just plain wrong.
And if we don't fix it, every CEO for these multibillion-dollar banks will keep right on loading up on risks and blowing up banks, and everybody else is going to have to pay for it. And that is why Senator Cortez Masto and Senator Hawley and Senator Braun and I have introduced a bill to claw back these crazy paychecks and make it just a little less profitable for bank CEOs to blow up the banking system.
I'm working with a bipartisan group right here on the Banking Committee, and I hope Congress does the right thing and that we get to mark this bill up. I ask respectfully, as soon as possible.
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