Tuesday, May 28, 2024

Lawmakers Tell Ex-CEOs of Woke Banks: ‘You Must Answer’ for Failures

Senate will examine SVB's 'payment of bonuses in the hours leading up to the seizure of the bank by regulators...'

(Headline USA) Leaders of the Senate’s banking committee on Thursday warned former chief executive officers at the failed Silicon Valley Bank and Signature Bank that they expect them to testify before the panel, saying in a letter to each: “you must answer for the bank’s downfall.”

The committee is examining the events leading up to the closures of the banks, starting with the first congressional hearing on Tuesday. Separate letters were sent Thursday to Gregory Becker, the former head of Silicon Valley Bank, and to Joseph DePaolo, the former head of Signature Bank.

Both CEOs had indicated to the committee they would be unable to attend Tuesday’s hearing, according to the letter. But the senators said they believe the CEOs can testify to Congress without disclosing confidential information. Nor would the executives need to hand over bank records and files to provide informative testimony, they said.

Attorneys copied in on the letters sent to the CEOs did not immediately reply to requests from the Associated Press for comment.

Silicon Valley Bank, based in Santa Clara, California, failed on March 10 after depositors rushed to withdraw money amid fears about the bank’s health. It was the second-largest bank collapse in U.S. history.

Regulators convened over the following weekend and announced that New York-based Signature Bank also had failed. They said that all depositors at both banks, including those holding uninsured funds, those exceeding $250,000, would be protected by federal deposit insurance.

Sen. Sherrod Brown, the Democratic chairman of the banking panel, and Sen. Tim Scott, the ranking Republican, said the committee needs to understand how the banks managed risk during their rapid growth and what led to them both having a large proportion of uninsured depositors.

Both have been criticized for prioritizing diversity initiatives, among other things, over risk management.

The senators also asked SVB’s Becker for information on the “payment of bonuses in the hours leading up to the seizure of the bank by regulators.”

Lawmakers also are scrutinizing the actions of regulators who supervised the two banks, and that will be the focus of Tuesday’s hearing with testimony from Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation; Michael Barr, a vice chairman at the Federal Reserve’s Board of Governors; and Nellie Liang, undersecretary for domestic finance at the Treasury Department.

The Justice Department and the Securities and Exchange Commission have also launched investigations into the Silicon Valley Bank collapse, and President Joe Biden has called on Congress to strengthen rules on regional banks and to impose tougher penalties on executives of failed banks.

Conservatives have scoffed at the idea, pointing to the fact that it was Biden’s policies—notably his reckless federal spending, which helped spur inflation, which prompted the Federal Reserve to jack up interest rates—that contributed in large part to the failures.

Some, including former national security adviser Michael Flynn, also have warned that the leftist administration may intend to use a bank panic as justification to impose a central federal digital currency—essentially, a government-regulated alternative to cryptocurrency that could have dangerous implications for civil liberties and privacy rights.

Adapted from reporting by the Associated Press

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