Transcripts For CSPAN Failed 20240706

Order. The joint subcommittee hearing is titled concern continued oversight on Regional Bank failures. Without objection, all members will have five legislative days to submit extraneous materials to the chair for inclusion in the record. Without objection, the chair is authorized to declare a recess of the committee at any time. With that, i now recognize myself for four minutes. Todays hearing will help the Financial Services committee learn more about recent Bank Failures, including management missteps, supervisory failures, and rapid fire bank runs in the age of social media. I think our witnesses for testifying today. The recent banking crisis was fueled by failed Bank Management, lack of hedges against Interest Rate risks, failed military policy, failed supervision, and overspending by the administration and democrats that led to historic inflation, prompting increased Monetary Policy action. Today, we will hear about what went wrong from the Bank Management themselves in state regulators. This is important, as the committee is still waiting to get information from federal regulators about what happened. Information has been provided to the Government Accountability office, but has not found its way from federal regulators in treasury to this committee. Instead, individuals at the fed, fdic, in state regulators all the states do their own self assessments of the recent bank and supervisory failures, and hastily put out public facing narratives before independent assessments can be made. Todays hearing will help fill in some of the gaps that remain, given the lack of transparency and accountability from federal regulators. To improve matters, i put forward five bills increase transparency and accountability a federal regulators in their actions, especially when emergency measures are employed. We are not here to defend management movements that failed or to put anyone on trial for prosecution. And looking at the recent Bank Failures in the continued turbulence in our Banking System, it is important to acknowledge that the Bank Failures did not occur in a macroeconomic vacuum. We have seen runaway inflation that was fueled by reckless, nearly two trillion dollar American Rescue plan in march of 2021, one personal saving economy what was already an astounding 5. 7 trillion dollars. Inflation continues to hammer american families, and the Federal Reserve was late to respond. Because the Federal Reserve failed to tighten Monetary Policy in a timely manner, Interest Rates were boosted at the fastest pace in modern history. That rapid Monetary Policy shock injected increase Interest Rate risks into the economy in general, and banks and Balance Sheets in particular. Federal regulators and supervisors were again late and responding. They relate even realize the rapidly growing Interest Rate risk called for increased supervisory vigilance and prompt corrective attention to banks that face the largest risks. Reading the hasty review of the regulators, things that failed at mismanage risks or inattentive to Risk Management gaps that supervisors and examiners have identified, and sometimes were not adequately responsible or timely in taking necessary mediations. According to their narratives, regulars face staffing issues and maybe couldve been more forceful and working to get timely or remediations. Its impossibly important issues are brushed aside by the regulators reviews. Prior to the big players, they have been years of work from home in virtual rather than in person Bank Examinations because of covid restrictions. That fact, however, received only a few sentences in the federal report on svb, identifying only the quote, covid19 examination a search of the fdic review of Signature Bank for the word covid provides one instance. It seems that such a factor many others Glasgow Village reviews deserve more scrutiny. Hastily produce reviews by regulators or native for public release around the same date calls into question the extent to which narrative setting, rather than establishment of actual facts, was the motive for the reviews in public reports. Those reviews were led by individuals from the fdic and fed and not for the full boards, so that they provide only one limited side of the story. I welcome the views information that we will hear today, especially considering the lack of transparency and accountability from our federal regulators. And i recognize the chairman, or rather, the Ranking Member of the subcommittee on financial to shunts airy policy. The gentleman from illinois, mr. Foster, for five minutes. Thank you mister chair, thank you to our witnesses for appearing here. My career in congress and on this committee began in march of 2008, which was an interesting time to be a new member of the Financial Services committee. We spent my first three years on this committee. First, dealing with the emergence and response to the financial crisis. Secondly, to identify the that were broken in the parts which werent. And deciding what needed to be prepared, and thirdly, to deal with the regulatory response, the doddfrank bill that basically into a couple months ago, had a pretty good record for vending largescale Bank Failures and financial crises. The financial crises that we are dealing with here is orders of magnitude than what we dealt with here. We should keep that clearly in mind. But when the machine breaks, we have to identify whether broke due to a design flaw or manufacturing flaw. That all the parts work as designed . Or was it simply subject to unanticipated conditions that are outside of its designed specifications and warranty . And so that is a lot of what this hearing is about. We have in front of us some of the key components in trying to keep a bank from failing, we want to understand a little bit more about the details of what happened there. Ha and so we also have to look at the changes that have been made externally to the Banking System. Having to do with the presence of the internet and communication, and if people are terrified now about the speed at which banking rants can happen, imagine will happen in a few years where everyone is using their chatgpt money manager, which will be programed to pull your money out the moment a banking man is detecting our system, how much capital and liquidity do you have to hold against that sort of environment . And so the environment is changing. But our first appears that we have to understand that if everyone played the roles as appropriate to the rules that are in place as a few months ago and the previous couple years, and i look forward to this hearing. Thank, you i yield back. Gentlemen i now recognize the chairman of the oversight committee, mr. Huizenga for four minutes. Thank you mr. Barr, chairman barr i should say, and im glad that we were able to proceed with this joint subcommittee. I think that this is important work that we do as we, on these very subcommittees, dig into the details and find out what are some of the most challenging issues that we have experienced economically here in the last couple of years. And i do want to say thank you to the witnesses for being here, because this hearing from you is vital. It is vital, as this committee continues its investigation into the recent failures of both Silicon Valley bank and First Republic bank. And in testimony today, we are going to hear, i imagine, some try to pin these Bank Failures solely on bank mismanagement. Some will try to pin it slowly on failed supervision. Some on president runs on deposits field by social media. I think that the reality is, and everybody up here realizes, that it is a combination of all three of those things. Coupled with high Interest Rates, years of easy money, as the chairman was highlighting, and stimulus field consumer spending, this administration and the fed overheated our economy and then relate to pump the brakes, or to borrow the punchbowl analogy from alan greenspan, no one had the courage to take the punchbowl away from the party. And so im sure some of my colleagues already let you off the hook and maybe try to change the narrative. It should not be understated that the management of each of your banks is questionable at best. You are not at managing both short and long term risks. You quoted deposits from risky businesses. Took untenable financial risks, and ultimately failed to respond to rising Interest Rates. And mr. Becker, you relationship with the San Francisco fed should be scrutinized. At the time is a failure, svb had 31 open supervisory failures or warnings from regulators, and yet nothing was done. It is not gonna notice that your position on the feds board of directors potentially created a relationship that impeded supervisors judgment and created some of that leniency. And for their part, the Federal Reserve missed or ignored all of the signs. And when they did react, it was too late. Yesterday, in testimony before a committee, the vice chairman of supervision, mr. Barr, the other mr. Barr, at the Federal Reserve admitted that we what we have all known for months. The failure of your banks was a result of failed supervision under his watch. He finally admitted that you had the responsibility of that. However, federal regulators will attempt to use these Bank Failures techs are size more and more authority well outside of the bounce that congress established for them, and the notion that these failures were a result of regulatory changes is unfounded, as we heard from the g. A. O. , their reports about the fed started in 1991, not 20 1 55. It was 1991. Nevertheless, regulators will try to shift the blame, but the facts are clear. And in testimony before our own Committee Last week, the geo flag those concerns and supervision enforcement practices, going back to 1991, report concludes that all three federal financial regulators have quote, why discretion choosing from among Enforcement Actions of varying severity, close quote. Lastly, an independent assessment of these events is not only appropriate, but its desperately needed. This committee is committed to providing the american taxpayer with an unfiltered review of the events that preceded these bank collapses and ultimately they bear the cost of your failures. I look forward to hearing from each of you as we continue to seek these answers, and mister chairman, i yield back the balance of my time. The gentleman yields back, i now recognize the jeweler from texas, the Ranking Member the oversight and investigations have committee mr. Green for five minutes. Thank you mister chairman. Mister chairman, holding this oversight hearing today with the former chief executives of Silicon Valley bank and Signature Bank will allow important questions to be asked, and answers to be received from those who purchased the root cause of the banks collapse. And yesterdays hearing, regulators acknowledge their shortcomings. Todays preeminent question is, will todays bankers acknowledge their fault . Will they take responsibility for the more than 70 uninsured deposits that alarmed depositors. Well they acknowledged both Silicon Valley bank and Signature Bank experienced outsized growth between 2018 2022 . And that Signature Banker from approximately 47 billion in total assets in 20 18 to 110 billion in 2022. That Silicon Valley Bank Increased from 56 billion to 209 billion over that same period of time. Will they admit that this outsized gross is in assets was filled by more than 70 uninsured deposits at both banks. For higher than the medium of 32 for conquerable banks. Will they confess that the executives of both banks knew or should have known that their Risk Management practices had to be strengthened appropriately as they grew in size exponentially. Will they concede that it was irresponsible for Silicon Valley bank to operate without a chief risk officer from april until december 2022. Will they agree that those who nurtured the root cause of a base collapse, should return any bonuses receive as a collapse came to fruition. Will they allow and a vow that upon Silicon Valley bank having received 13 of the most serious supervisory warnings that the fed is issued, the banks officer should have taken corrective action. And will they come clean about Signature Banks failure to take corrective action after having received nine matters requiring border tension notices from the federal deposit insurance corporation, including three specifically relate to liquidity or Risk Management. Mister chairman, the time for atonement and recompense is at hand. Today provides us the opportunity to hear from those who had a hands on experience with the failure of these banks. These persons were capable, confident, and qualified. They all have degrees indicating such, and they have experience keynoting such. They should have taken corrective action. They will be given the opportunity to answer these questions that i have called to the attention of not only this committee, but also of this country. The people of america need to know what happened at these banks. This is a time for us to find out. I yield back the balance of my time. The gentleman yields back. And i recognize the gentleman from north carolina. The chairman of the full committee on Financial Services. Mr. Mchenry for two minutes. I wanna thank chairman barr in the right numbers as well. The days hearing will hear three different stories from three different banks. The Business Models were not the same. Youre depositors one of the same. The degree of mismanagement was not the same in the midst of this crisis. The truth is, each of you bears responsibility as captains of your respective ships, and weve heard that for me. There is a storm brewing, and you failed to batten down the hatches. And while inflation raged, the fed in the biden ministration told us it was transitory. Nothing to worry about. But we will get into the management question shortly, but one of the mistakes though is that these three bankers actually believed the bureaucrats. We all know inflation was not transitory, and after being late to respond, that was forced to raise rates at the fastest pace in modern history. And again, failed to properly prepare for this inflationary and high Interest Rate environment. Silicon valley bank was the projectile that set this volatility into motion. The Biden Administration used another word to describe svb. Idiosyncratic. Well clearly, three of you today, three of the 30 largest banks in american history, in america today, and the problem goes much deeper. The subsequent failures of signature in First Republic coupled with the volatility and Regional Bank stocks sent shockwaves their financial system. The fear of contagion has rocked an already shaky economy. Its a well hear from each of you today, in new york in california think regulators as well. I think its important to take a step back and really examine the undercurrents the cause this crisis. The economic mismanagement by the Biden Administration, he quit the perfect storm that each of you failed to write your ship in. I yield back. The gentleman yields back. Today we welcome this testimony of mr. Greg becker, former ceo of Silicon Valley bank. Mr. Scott shea, cofounder of Signature Bank, and mr. Michael roffler, ceo of First Republic bank. We take all of you all for being here, you will all be recognized for five minutes to give an oral presentation of testimony but without a objection, all of your written statement will be made part of the record. Mr. Becker, you are now recognized for five minutes. Huizenga, Ranking Members green and foster, and member of the subcommittee. Thank you for the opportunity to appear before you today. My name is greg becker, and i was that ceo of Silicon Valley bank. Im here today to answer your questions about what happened at svb to the best of my memory. At the outset, i want to be clear that i never envisioned myself or svb being in this situation. I was employee for svb for nearly 30 years and ceo for the last 12 years until it was taken over by the fdic. I believed in the bank and its mission and care deeply about art more than 8000 employees and their families. I was committed to our clients and helping them succeed, whether there were wellknown Tech Companies or Small Business founders across the country. Svb was designed to meet the needs of technology and Life Science Industries for startups and later Stage Company could keep their deposits. If i were to expand their businesses and create jobs. We do our clients personally, understood their needs and goals, and partnered with them as they groom. Who took Risk Management seriously, and worked closely with and more responsive to the various regulators who oversaw svb. Overtime, we built and expanded a focus on analyzing this in protecting the bank. And we sought to add expertise and experience to enhance our Risk Management as the bank, and its clients involved. Much has been said about the takeover of svb by the fdic and why it happened. Ultimately, i believe that as bbc failure was brought about by a series of unprecedented events. Between 2015 to thousand 19, svb grew from 45 billion abscesses 71 billion in assets, i dont annual rate of about 10 . The strange in 2020 due to the covid19 pandemic and the government stimulus measures. With near zero Interest Rates and the largest government sponsored economic stimulus in history, more than five trillion dollars flooded into commercial banks of the mid states. By the end of 2020, svb had grown 63 over the prior year, and in 2021, svbs assets grew another 83 to 212 billion. To support this growth, svb raise more than eight billion dollars of new capital in 2021. Importantly, throughout 2020 until late 2021, the messaging from the Federal Reserve with that Interest Rates would remain low and that the inflation that was starting to bubble up would only be transitory. During this time, as should be invested in low risk, highly rated government backed securities. The securities were safe assets, and they were backed by the u. S. Government and could easily be used as collateral for borrowing for liquidity if we needed it. These fixed Income Securities complemented are short duration loan portfolio. Approximately 90 of which had variable Interest Rates. In fact, of the u. S. Banks collectively invested nearly 2. 3 trillion of their securities portfolios in this low yield environment created by the Federal Reserve. To counter changing market conditions, nearly higher Interest Rates it has been over a longer period of time, im much eight we sold svbs available for sale securities portfolio and planned capital raise. Unexpectedly, on this same day, Silver Gate Bank announced its intent to voluntarily went down in the quid eight and depositors triggered a run on that bank. Despite stark disturbances in our Business Models, news reports investors wrongly lumped svb and silver gate together. Rumors and misconceptions quickly spread online, culminating on march 9th with the first ever social media driven bank run, leading to 42 billion in deposits being withdrawn from svb in ten hours, roughly 1 million every second. Over two days, 80 of total deposits were respected requested to be removed from svb. At the end president philosophy of this bank and contests, the previous largest bank run in u. S. History was 19 billion over 16 days. In the face of these are precedent events, the Leadership Teams made the best decisions we could with the facts forecast available to us at the time in the best interest of svb, its employees, and its clients. I worked in a place that i truly loved. Alongside our dedicated employees to support our clients who are innovating and astonishing ways. I believe it as we be had a positive impact on the roughly 100,000 clients. The gentlemans time has expired. Mr. Xi, you are not recognized for five minutes. Chairman barr, chairman huizenga, thank you for the opportunity to be here today to discuss the nature bank in my role as chairman of the board. In 2000, i cofounded Signature Bank. At the time, the Banking Industry was experiencing many mergers. Many big banks were not serving the needs of middle market customers. I felt that a mid sized banks would provide important commercial service to business that preferred a smaller, more personal experience. Signature bank followed a single point of contact approach where the banks clients teams personally serve the needs of small and medium sized businesses. Our bank had a Diverse Group of clients, including industrial companies, commercial real estate firms, Health Care Providers, professional service, nonprofits, in many others. We placed a priority on providing financing to Affordable Housing providers and low and moderate income areas, and its over many years. Through the hard work and dedication of our employees, we went from a small bank with 40 million in startup money to a successful middle market bank with more than a billion dollars, hundred billion dollars and assets. We were solid in a thriving bank that played an enormous and Important Role in our clients businesses, and i was very proud of our success. In 2018, we begin accepting deposits for businesses in the Digital Assets sector. I supported this effort, because i believe that Digital Asset Payment Systems could make Financial Transactions faster, easier, and cheaper. With funds moving from place to place in minutes rather than hours or days. And then a much lower cost than traditional Payment Systems. I was not alone in my enthusiasm for Digital Assets. Over the years, many, many other banks and many financial situations and others have entered the market for Digital Assets and governments, both state and federal, have expressed support as well. Its with other parts of Central Banks business, digital deposits grew overtime. Nonetheless, it is a relatively new sector, signature monitor the business in the effort to make sure that clients mid standards, including for compliance with antimoney laundering laws. We also limited the kinds of businesses that we would do. The central bank Digital Asset business was focus on accepting u. S. Dollar deposits from businesses in this sector. Additionally, public a supported increased government regulation of the Digital Assets factor and we to ensure that businesses operating within the sector had regulatory oversight. And the latter part of 2022, the Digital Asset sector experience increased volatility and regulators expressed concern. So your bank took these developments seriously, and just a few months, significantly reduced its asset deposits, Digital Asset deposits. Unfortunately, a series of extraordinary unprecedented events unfolded quickly. On march 7th, the bank was the distal aspect sectors that i was running out of business. Three days later, on march 2nd, a second bank was closed by the regulators. And then, within just a few hours, our depositors withdrew 16 billion dollars. Nonetheless, i was confident that central bank could withstand the economic earthquake that occurred that day. The bank was well capitalized. The bank was solvent. It was always solvent. Who is well in excess of liabilities even to the variant. And solid plan to continue a plan to withstand additional withdrawals. Although i believe the bank was in a strong position to weather the storm, regulators evidently saw things differently. On sunday, march 12th, regulators seized Signature Bank. Although i disagreed with this decision, i recognize the Important Role of the Bank Regulators playing in our financial system. My First Priority in helping to build Signature Bank was providing Excellent Service to our customers. I was there for police to the government guaranteed full amount of customers deposits. Having built a bank that for 22 years played an Important Role in the middle market sector of our economy was the pinnacle of my professional life. For that reason, march 12th 2023 was a devastating day for me. The gentleman yields back, and mr. Roffler, you are now recognized for five minutes. Thank, you chairman mchenry, chairman barr, chairman huizenga, Ranking Member fostered Ranking Member greene and members of the subcommittees, good morning and thank you for allowing me to speak with you today. Since 2009, i have had the privilege of serving First Republic bank and its employees, clients, and communities. I look forward to sharing with you a little bit about First Republic, our reputation for Risk Management integrity, and as well as our understanding of the unprecedented banking crisis that affected us beginning on march 10th. I would like to start by thanking my incredible colleagues, who have worked tirelessly since march 10th, continuing to serve our clients and delivering Outstanding Service in the face of unprecedented challenges. For the past 37 years, First Republic has built a reputation for its commitment to Extraordinary Client service, careful Risk Management, robust internal controls, in transparency with our regulators in the public. First republics financial position strategy were regularly reviewed by regulators. The california d fbi and the fdic. First republics manager board of directors took regulatory feedback extremely seriously, and just any manners in a timely manner. Either regulator expressed concern regarding First Republic strategy, liquidity, or management performance. Just the opposite. Up until the cataclysmic event of march 10th in the following days, which were triggered by the collapse of Silicon Valley bank and Signature Bank, First Republic was in a Strong Financial position, with strong Investment Grade ratings island with the nations largest banks. In fact, thanks to our employees extraordinary efforts, First Republic had its most profitable year ever in 2022. Starting in the fall of 2022, First Republic believed that the Federal Reserve campaign to fight inflation by repeatedly and significantly raising Interest Rates would make 2023 a more challenging year from an earnings perspective. First republic was transparent about the challenges posed by this higher Interest Rate environment. No one at First Republic could have predicted the collapse of Silicon Valley and Signature Bank, the speed at which it happened, or the impact it had on Banking Industry. Instead of dealing with temporary decreased earnings, due to Interest Rate pressures, this republic was contaminated overnight by the contagion that spread from the unprecedented failures of those banks. For march 10th, First Republic was conducting a business as usual. Indeed, during the day on march 9th, as uncertainty surrounding Silicon Valley grew, we experienced a significant inflow of deposits had First Republic from clients who have withdrawn their money from Silicon Valley. Everything changed overnight. On the morning of march 10th, one Silicon Valley collapsed, a run on First Republic began. In response to an industry wide pandemic about the soundness of Regional Banks, industry wide panic about the soundness of Regional Banks, which was exacerbated by traditional media and social media, over the course of the ensuing weeks, over 100 billion in deposits were withdrawn from the bank. Despite herculean efforts by my incredible colleagues at First Republic to continue providing exceptional clients of us, managements tireless efforts to save the bank, and the support of 11 of the nations largest banks, investor and depositor confidence never recovered. Throughout this period, i encourage colleagues to be there for and serve the needs of our clients. The clients continue to withdraw their funds, into protect our climbs in the positives, the fdic reached a purchase in assumption agreement was Jpmorgan Chase to assume all of the deposits and substantially all of the assets of First Republic. We continue to work hard every day to ensure our clients receive the service that they deserve. I look forward to working with the committee to restore confidence in the Banking Industry, and i would be pleased to answer your questions. I think the witnesses for their testimony. We will now turn to member questions, and will recognize myself for five minutes. Let me start but following up on the line of questioning that i asked vice chairman barr yesterday, and i asked mr. Barr if the delay in Monetary Policy normalization in light of persistent and high inflation, i asked if gradually tightening Monetary Policy versus precipitously raising rates would have made it easier for the fed to supervise and banks to manage Interest Rate risks. He declined to acknowledge that Monetary Policy failures by the fed where the underlying cause of the current instability of the system. While i do agree that it is the responsibility of Bank Management to manage Interest Rate risks, i believe that we should also acknowledge that the feds unprecedented and protected easy money policies and keeping Interest Rates too low for too long necessitated a historically rapid in precipitous increase in Interest Rates. 500 basis points in just 13 months, leading to a blunt and difficult Interest Rate environment for institutions to adjust to. Mr. Becker, did thank supervisors at the Federal Reserve of San Francisco show any extra attention to Interest Rate risk issues, and if they did, when did they begin to show that intention . Chairman barr, to my memory, the rapid rise in Interest Rates were going back to 21. That topic coming up, i dont remember that coming up the best of my recollection. So youre telling me, as the San Francisco fed 20 Bank Examiners in your bank every day, not once in the last year do you remember any of those Bank Examiners discussing Interest Rate sensitivity with you. With me . Again, my memory is no. It couldve happened with our Treasury Team, our cfo, but i dont remember having a direct conversation about that. Mr. Becker, Silicon Valley bank did not have a chief risk officer pigments up to its failure. Clearly, there are major Interest Rate restore obviously not being discussed by the Bank Regulators with you all. But it is safe to say the chief risk officer wouldve been a useful addition to the management team. What were your conversations with the fed on this issue, and had a voice any concerns with the vacancy or request that you take action to fill the position, and if so, how did you respond . Chairman, as outlined in my written testimony, towards the end of 21, and the beginning of 22, our board of directors and the regulators, the Federal Reserve were giving us comments about the need to enhance our chief risk officer position, especially as we start to approach 250 billion dollars of assets. We took that feedback very strongly, and we decided to make you change. So we did two things, knowing that takes quite honestly a while to find the best candidate for a role. In my assessment, it takes 6 to 9 months to find an executive at the caliber that you would want. We did two things to make sure that we did not have gaps during that time, of which both of those things were noticed and before we made the change, communicated to the Federal Reserve. First, we created a office of the chief risk officer. It was Leadership Team with a risk team along with new hires with qualify experience. Those images reported to me, and they also reported to the chair of the committee. The second thing that we did, we kept our existing chief risk officer as a consultant from april until october one. One chief risk officer started it was hired october, and then she started in december. After the fed expressed any concern that despite being in office, there was not a position filled . They did not. Okay, mr. Roffler, its our understanding that prior to entering receivership, you had all options on the Table Including the sale of your bank. Can you describe the difficulties you faced and finding a potential acquirer . If you could turn on your mic. My apologies, thank you mister chairman. Yes, following the events of march 10th and shortly thereafter, we worked with our Legal Counsel and our advisers to look at all options on the table, including potential merger in potential sales of assets. Did the fdic begin to gather Industry Data about your brain to put into acquires prior to the week of april 24th . Not to my knowledge. Mr. Becker, fdic chairman say that the ftc couldve moved and finding a buyer for Silicon Valley bank, saving the hit to the death, if there transferred and see and setting up data rooms. Can you explain perspective on how the process works, and whether the fdic couldve done better. So again, this happened very fast. And so on march 9th, which is really the first day that the bank one started, the fdic got involved. And then they took over on the tenth. We immediately worked with them and work as fast as we could to build a data room with the list of information that they were looking for. My time is expired, obviously it was not fast enough. I now recognize the Ranking Member of the subcommittee on financial to shunts and Monetary Policy, mr. Foster, for five minutes. And thank you mister chair. Mr. Becker, i accept what you said that you never envisage the situation of the Silicon Valley bank, but my focus here is what rules could have been in place that would have changed your behavior. Im actually spent a lot of the last few weeks thinking about what you should have done, if you had perfect knowledge ahead of time, and high on my list i simply hedging your Interest Rate risks instead of apparently removing some Interest Rate hedges, and also raising capital last summer when its still could. Are there other major things that you wish you had the foresight to have done . Congressman, maybe just to comment on your one point about capital raising, our capital ratios even up until march 10th actually very strong. But i understand, but one of the rules changes that we could make is to meet the recognize some part of your mark to market losses on securities. And that is, when my followup questions here, which we can try answering now, lets say that you would immediately had to recognize 1 of your actual market mark losses. With that affected your behavior materially . Congressman, the mark to market is into categories. What is your available for sale portfolio, all of it, just to take an extreme case, all of it. Yes, if everything with available for sale and held a majority was marked to market, yes, we wouldve had to raise more capital. But then that wouldve happened early last summer probably when Interest Rates start going up . Yes, when a mark to market occurred correctly. And then all probability, youd be solvent today if that had been the role . Im not saying that should be the rule, but there is a knob that we can adjust which is what the fraction of the mark to market losses should be immediately reflective. Congressman, as i mentioned my testimony, i believe that this was an unprecedented event. At the end, it was fueled by the fastest bank run in history, and i dont believe that my opinion, even with additional capital, if i were to occur, i dont think that we could or possibly any bank could have lived with that amount of deposit outflow and that short of a period of time. Well there are many many issues there. And there were also governance issues, and so some fraction of the regulatory findings would automatically have been made public, particularly the governance ones, one of the things that makes this hard for us in congress to deal with is that a lot of regulatory actions have to take place and secret, but if there was some fraction of things, for example, governance, that would automatically become public, with that to maybe act more quickly on the risk and absence on risk. Congressman, when the first discussion that i recall having with the regulators on the governments, questions of governance, was in january of 2022. And as soon as those conversations were had, we immediately reacted to that feedback. We dont wait into the may 22nd when a 22 letter. We immediately reacted to it. And we put together a whole series of programs and processes to make the improvements that were requested. And so i dont believe that you believe the threat of making the public wouldve exhilarated that at all . Okay. And so now if during the period of europe and growth, you have been forced to issue a contingent convertible that, as all of the asian banks and european banks this wouldve forced a conversation with the bond market as to the risk of the position of your bank. And that also divided a capital buffer that you would have access to when you got in serious trouble. Would this have materially changed your behavior, or the result . You can answer, that its a complicated question, if you want to answer that in writing for the record, i appreciate it, because that is one of the things that i think with the chairman and i think maybe part of the solution here to make it more stable Banking System, and i would be interested in your thoughtful opinion. The congressman is mentioning in my written testimony, i dont have access to information from the bank, and so i would do my best with the information that i have to and your question. This will not be an exact calculation of what wouldve happened. Id be interested in your opinion. Mr. , it seems like the most significant factor it signatures demise was not so much a concentration of Crypto Assets or deposits, but a lack of tangible assets immediately bailable for liquidity support. Other changes in procedures or rules to make that more agile, that you would advocate. I dont know the answer that question. I do know that when we open at the beginning of march 10th, we had 29 billion dollars of illegible assets that were at the federal bank in the Federal Reserve, and in terms of the ease of moving those assets, that was something that could be looked at in terms of making. That will have to move, on the gentlemans time has expired, and i now recognize the chairman of the subcommittee on oversight and investigations minister huizenga for five minutes. Thank you chairman barr, i appreciate the witnesses being here and your candor. Im going to ask you what i hear is to have the most important questions frankly it will go down the line asking you this. Versus whether you take responsibility for the failure of your bank. Mr. Begor . Mr. Becker . Congressman, as ceo, i think you have to take responsibility for the ultimate outcome of every institution. As chairman of the board, i think i did a responsible role throughout unfulfilled my duties. Sorry, just a second. Do you accept the responsability for the failure or do you believe it was other management . Im sorry that the bank was seized by the regulators. I thought we had a responsible plan over the next morning. So i take that is now . Mr. Roffler. Mister chairman, this was an event that isnt foreseeable when it happens, and the contagion spread very quickly and panic is very hard to control. What i feel responsible for is for our colleagues, each and every day, and our clients even every day to make sure they are taking care of and supported during this time. So that also sounds like an oh, so congratulations mister becker, you are the only went to man up and actually take responsibility for that. So, i will start with you, and since i cant get the other to actually admit to their own failings, id like to hear from you. Would you have done differently in hindsight . Congressman, that question to the point made earlier by congressman foster, i thought about that a lot over the last several months. And when you look back with hindsight i what couldve been done differently than i think it is very challenging because when you make, then you go back and make decisions, you have to go back and look at the fact that you had. When it tried to describe in my written testimony is that the facts that we had, that i had when i made my decisions, and i believe my team had i truly believe that they made the best decisions as the day with the information that we had. We are going to explore that a little bit more. And you testified svbs cap on the quarterly work validated by regulators in 2022. You are in a statement points on august 2022 letters and by regulators they conveyed second highest possible camels rings of two, meaning that satisfactory on and downgraded the liquidity rating when you receive the supervisory letter. Were these ratings cause for alarm, or did you confirm that you are on track, and then i also wanted to address only the said to chairman barr. He said the fed did not talk to you about the Interest Rate risk. They had 31 matters requiring attention, but none of them were about Interest Rate risk . Talk to me about that. Congressman, the best of my recollection, i dont recall a direct conversation about that. I know that i believe towards the end of 2022, there is a matter requiring attention an Interest Rate risk that was issued. That was, i was not in the meeting in late 2022, i believe that was in late 2022. Until that time, im confirming what you are saying in chairman barr, but this was not an issue for a regulator. Congressman, to the best of my recollection, i dont recall. Well you have of understanding to target matters requiring media tension. What were the major issues at that to your recollection . Congressman, if i can clarify one point. The understanding was never issued. It was verbalized to us, and it was verbalized in early 2022 that doesnt really sound like a memorandum. Thats on like a conversation if im understanding. All right, so did regulators follow up with you on the status of this mou conversation or ask for your timeline or give you a timeline . As i mentioned earlier, we were incredibly responsive the feedback that we received. And well quickly, we have 30 seconds, and you testified that you offered several times the ftc to quote engage potential acquirers and run through a list of the names but you believed would be most likely acquirers, and every single bank ive ever talked to, big, small, or medium, as always had some conversations with competitors who might become allies. He stated that you offered your assistance, but the fdic never consulted you in this. Can you confirm that, and what do you think that they didnt, and then they give you any indication of why they had no interest in your opinion on this. Congressman, i can confirm that they did not engage me and reviewing a list or talking about any potential acquirers. That is a, i yield back. Gentlemans time is expired. I now recognize the Ranking Member of the oversight investigation subcommittee, mr. Green, for five minutes. Thank you mister chairman. Chief executive officer becker of Silicon Valley bank, were you a board member of the Federal Reserve bank of San Francisco. I was. Educated well in banking . We are educated well and banking . Ive been baking my entire career. The republicans, my colleagues, who i love dearly, they seem to believe that failure to sufficiently punish you is a cause of the banks failure. Theyve been alluding to this for days now. In fact, perhaps even weeks or more. Are you contending that because the regulators did not punish you properly, your bank failed . That would be a yes or no, sir. Congressman, we sir, that would be a yes or no. Are you containing the failure of regulators the fun issue properly is a cause of the failure of your bank . Congressman that would be a yes or no sir. Would you contend that the failure sir of regulators to punish you is y banks failure. Congressman, we were responsive to the regulators. The question is not whether you are responsive sir. Please, are you blaming the regulators for not punishing you. So if they had punish you, its what youre seeing now, you wouldve done better, is that what we would understand . A man who set on the Federal Reserve board, ill be educated, is that what we are to understand . Congressman, as i articulate my written testimony, there was a series of unprecedented events that all came together. But that is not the question. You see, you are issuing the answer and the question, i might add. The question is about you, your experience, and whether youre not going to blame a lack of punishment. You dont differ with them. I understand it. But this is a time for truth. You have to speak truth, sir. You know that the failure of regulators to punish eu is not the reason your bank failed. Congressman, i believe for regulators, as the svb management team, did the best they could with the information that i have. Thank, you that is efficient, i appreciate you saying that, because for too long now, my colleagues have contended that it is the regulators who are at fault here. The regulators are not a fault. They have some things that they could have done, perhaps, and should have done. But at the end of the day, according to the Government Accountability office, and according to the regulators who were here yesterday, the banks failure lies with the banks. At the end of the day. Now let me ask you another question. And this will apply to all three of you. Just raise your hand, because i dont cant ask you individually, i dont have time. In a view conferred with the president about Risk Management and banking. If so, raise your hand. Any of you. President biden. That is a reason to the question. But the record reflect that no one has raised their hand. The convention for my colleagues is that this is all President Bidens fault, because of President Biden, you somehow made mistakes in your Risk Management practices. You did not talk to President Biden. You dont base your decisions on news reports about Interest Rates that you cannot validate or at least have your Risk Management people give you some confirmation on. And if you think President Biden calls you to make the decisions to make his decisions, raise your hand. Let the record reflect that none of the witnesses has raised their hand. Finally, this. Do you think that the bonus, as received, mr. Becker, chief executive officer, should be returned . The bonuses received at near the time of the collapse should be returned . Congressman, that would be yes or no. With the process thats going to be given but do you think that they should be returned . Congressman, i will cooperate with the process. Ill give you some call back Registration Fee to cooperate with. I will yield back. The gentleman from florida, mr. Potency, is now recognized for five minutes. Thank you very much mister chairman barr. We heard in exchange a while ago from member on the other side, talking about 2008, and he was reminiscing on some of the circumstances. They went very pretty. But one thing that was resolved but the party in charge of that time to make sure that we never had another bank failure of an economic crisis, they establish the cfpb. The Consumer Financial protection bureau, and amongs charges was to make sure that we never had any more Bank Failures. And im just wondering, did you have any contact with the cfpb, mr. Becker . The cfpb was one of our regulators, they give it that we are predominantly a commercial bank, interaction with the cfpb it wasnt as significant as the other regulators. It was less significant with the other regulators, i had that correct . In the Federal Reserve in the state in the fdic. Mr. Shea shay, same question. And i will chairman, i dont recall ever meeting somebody from the cfpb. Mr. Roffler, same question. I dont believe it with anyone from the cfpb but they did periodic exams in visits to First Republic. And you think that the cfpb, mr. Roffler, couldve been more helpful . And helping you avoid i think the cfpb, along with other regulators, interacted with, we ensured that we had a very professional relationship, and we shared with them what the bank was up to and with the strategy was and how results were, and they did a thorough examination, and so we responded with feedback. Mr. Becker, did you steal, convert, or otherwise effect and if you stop in the 12 months proceeding . I sold, there is no stock that was sold in 2022 into the mic, i cant hear you well. There was no stop, and so many stock in 2022, and in 23 i sold after earnings release, after was reviewed by our legal team myself that i did not have inside information about it and be 51 plan in place in january, and that was sold with expiring Stock Options from 2016. How much was that, the value of the time of that probably . The gross amount was three point 6 million. Okay. Mr. Shay, same question. I sold no shares i sold no shares, i sold new shares in 2022 with the exception of reversing three shares that were accidentally bought in my account, which were then sold back, those are three shares, indeed i purchased shares throughout that period. In 2023 . 2023 are purchased shares on march 10th, 2023. And mr. Roffler . I transacted twice, once in 2000 2022, and once in early 2023. Both of those transactions were made with the approval of our apology procedure internal counsel. And were also made the following disclosure of Financial Information to the market, one, three investor, day number two, the earnings release, in the last thing i would say is that it represented a portion of my ears, and the vast majority of retained. What were the dates, the amounts of those transactions . The dates were about november 15th or 16th, and it was just over 1 million. The other date was there on january 19th or 20th, roughly the same amount. I see my time is about to expire. Mister chairman, i yield back. The gentleman yields. The gentleman from california, mr. Sherman is now recognized. Thank you. One thing i have commented on is the idea that the Federal Reserve regional boards are not only selected through democracy, the voters of this country, but governmental powers are given to those who are elected by banks. And they elected greg becker. Im not so sure it is a good system we ought to have all governmental power in this country in the hands of the executive, judicial or legislative branches of government. One Bank One Vote is not democracy. After hearing the near tearful presentations by the ceos, the dedication to their customers and employees, i guess they want us to say thank you for your service. Cant say that. My republican colleagues are in a desperate effort to defend corporate malfeasance with their own strategy of blame biden. In fact, what they have suggested is that we should not have fought inflation, and america should have higher prices, we should have managed all Monetary Policy so that the three worst run banks in america would survive. Talk about the tail why getting the dog. This was not the 100 year flood. We saw the 16 Interest Rates under the reagan administration. I did not say the harding administration, the reagan administration. This was a modest rainstorm. And the three of you went down. 99. 5 of the banks survived this modest storm. The reason why these banks went down is because recklessness and greed. The bigger the bonus, the bigger the risk, the bigger the bonus. And i will illustrate that in a bit. We should not be blaming the depositors. The depositors did not take their money out of profitable banks, they did not take it out of solvent banks, this is not a liquidity problem. The strongest bankers in this country look at Silicon Valley bank and determined that it was worth negative 20 billion dollars. If anyone has the money in a bank where the net worth is under, hes a negative 20 billion dollars, it is time to get your money out of that bank. Okay, so, Silicon Valley bank virtually doubled the duration and therefore increase the yield of the securities that it held, and that led to bigger risk, higher profits, and more money in mr. Beckers bonus for the 2022 fiscal year. Then Silicon Valley bank at the end of 2021 and 56 of its available for sale portfolio edged through credit default swaps. In other words, they had insurance on his 56 . They save money, cut the insurance down to ensuring only 2 of the portfolio, hired a lower cost, higher profits and bigger bonus. So it is not surprising that these are the banks that went down. Mr. Becker, you said you will take responsibility for the collapse of your bank. Are you willing to return the bonus that you got the day before the bank failed that even took on your hawaiian vacation . Congressman, as i said earlier, i plan to cooperate with the process. Will you would voluntarily, or only if the Government Forces you to . You congressman, i will cooperate cooperate . That means only if the Government Forces you to . Will you voluntarily returned that portion of the bonus, directly attributable to the bangs higher income for 2022 because he went to longer term, higher yield securities . Congressman, i will cooperate then its only enforced. Will you return the portion of the bonus attributable to the money you saved by throwing away your Flood Insurance as it began to rain, cashing it in and not having the edges and credit default swaps when your portfolio, will the return that part of the bonus . Again, not voluntarily. I will cooperate with the process. Mr. Begor, you testify before congress in 2015, but having tough regulation would divert significant resources of the bank to complying with enhanced provincial standards, and other requirements. So we have less regulation of your bank, how did that work out for you . The gentleman can submit his answer in writing. The gentlemans time is expired. The gentleman from missouri, chairman of the National Security subcommittee is now recognized. Thank you, mister chairman. Gentlemen, as tragic as the situation is, i think its also a learning moment for all of us, a structure moment for us in congress, for the regulators and bankers around the country, quite frankly. Standpoint i think where the new world now with regard to social media and the actions that can be taken, that can have adverse effect on our financial system, culture and economy. And im very concerned about it. Each of you in your testimony mentioned mr. Becker, in ten hours, mr. Shea, 16 billion went out in a few hours, and mr. Admits the number on yours, you have the same situation where social media excite people to the four point where they ran out and change their banking situation. As a result, a lot of the uninsured deposits in the bank ran out. I would like for you to give me your analysis on this. What is the fdic tracking this with you as this was happening, so that they were aware of this, or you notifying them at all as this money was running out the door. Mr. Becker . Congressman, we were notified the regulators we were doing at the capital rates were aware of that. And when the bank run started on march 9th, i was not directly involved, so i cannot say the exact discussions that were happening. To my memory, to my knowledge, our risk team and Regulatory Affairs team were engaged in conversations with the regulators. Mr. Shay . As chairman, i dont know precisely the conversations that were taking place between treasury who was a contact, i guess is a question. Excuse me . Whats the contact between your bank and regulators in regard to the amount of money flowing out . I would defer to management. Mr. Roffler . Thank you for the question, congressman. As i mentioned in my testimony, we always had an open working relationship with regulators. That included as the contagion spread, on march 10th, we had multiple meetings in the morning, all the way through the evening that day, reviewing our funding, our liquidity and what was happening. I was on wall street during 1987. Panic that was flying through social media, people were saying they didnt want to hear about solvency, did not want him at 29 million liquidity, they did not want to hear about rating agencies, did not want to hear anything. They just wanted to hear that they got their money into a too big to fail bank, they needed it immediately. Mr. Roffler . Mister congressman, theyre a challenging. The panic was very real. As i spoke with clients at the end of every conversation, if they decided they wanted to do something different, weve facilitated that and help them, but definitely it was starting with the contagion which spread to us. This concerns me. Back in 2020, we had a run until a paper of all things and i think people will prioritize money over toilet paper. So we already have three examples over here and i think the regulators took some actions to minimize this contagion effect across the system where there was enough or not time, im not sure. I think its something we need to look at and study. Chairman barr was here yesterday, he made the comment, the corresponds ability of examiners to look at Interest Rate risk and equity. Risk we are looking at industry risk in your bank . Congressman, Liquidity Risk i know for a certainty that it was discussed. And again as i mentioned earlier, answer the question, i dont have direct experience in hearing about Interest Rate risks. But i am confident that it happened. Thank you very much. The gentlemans time has expired. The gentleman from georgia, mr. Scott is recognized. Mr. Becker over here, what percentage of your deposits at Silicon Valley exceeded the fdics insurance cap just before the bank collapsed on march 10th of this year . Congressman, as i mentioned in my testimony, ive been at espy for 30 years, and for my recollection, we always had a high number of uninsured deposits. It was not that much different at the end mr. Becker, i am sure that the whole nation, the whole world knows that you had a high percentage. But in fact, according to the s p, Global Market didnt diligence, from december, 2022, we now know that Silicon Valley bank ranked first among banks with more than 50 billion in assets, with 95 of its total deposits being uninsured. That is the truth. And for you not to know that, for you not to answer that is absolutely unbelievable. While the average for u. S. Banks was 30 , you had 95 , almost all of your accounts, uninsured. According to the snps Global Market intelligence. Not only exceeding the fdics insurance cap, but doing so with this 95 in high concentrations, in the Technology Sector, making your bank highly susceptible to panic. I think you are going to go down in history as absolutely being the most irresponsible leader of a bank in the history of this country. To have 95 , almost all of your accounts uninsured. So not only were you exceeding the fdics insurance cap, but with this Technology Sector making your bank highly and susceptible to panic. So let me ask you this, mr. Becker. At any point leading up to march 10th, were you made aware of regulators concerns regarding your banks over reliance on 95 of your bank account being uninsured deposits . Congressman, to my earlier point, we as a commercial bank always had a high level of uninsured deposits. And to my memory the high level, you keep saying high level all of them even, i cannot even imagine that you are thinking at that. And you think that the American People are not highly disappointed in your total disregard of their money, in your hands, and you are not having it ensured. Less than 5 ensured. Let me ask you this, who made the decision to maintain this reliance on uninsured deposits, given the warnings, also by our federal regulators. Who made this decision, mr. Becker . This foolish, irresponsible and deceitful decision . Who made it . Congressman, as i said, that has been our Business Model who made the decision, my friend. Was it you . The gentlemans time is expired, he can submit an answer in writing for the record. The gentleman, the gentlewoman from missouri, miss wagner, chair of the subcommittee on Capital Markets is now recognized. Thank you, mister chairman. I want to thank our witnesses for preparing for the committee today. The reckless actions by you and your management put the paychecks of millions of americans and thousands of businesses some of which were in my district, missouri second can Congressional District at great risk. As these failed, i have businesses that provide good jobs in my district, left wondering if they would be able to even make payroll following this. Now yesterday, we discussed a supervisory failures, abject failures of the credential regulators is now abundantly clear that they should have taken stronger, enforced actions after many, many citations. Mris, mri aims to prevent these from happening. Today, i want to hear from you all as to why your banks were insufficient in addressing a rising Interest Rate environment which started over 12 months ago. Mr. Becker, as Interest Rates increased at the most rapid pace in modern history, because Monetary Policy had battled, runaway inflation, did supervisors at the fed show extra attention to Interest Rate risk issues . And if they did, when did they begin to show that attention . Congresswoman, as i mentioned earlier, we will look at the supervisory findings, we had one mra regarding Interest Rate risk, mainly related to modeling. Again, my mock memory, i dont recall that coming up as a major topic. What was the discussion that had been had, the main one was around liquidity. And we, to my knowledge, addressed all of the majority of those findings during 2022. Mr. Begor, by march 8th, 2023, when svb announced it was selling the available for sale a portion of its securities portfolio, the fed had already implemented nine Interest Rate hikes. Why didnt svb attempt to sylvies securities sooner . Congresswoman, the decisions around when to sell a security and what to do is monitored and managed by our offset liability can the, our Treasury Team and overseen by our finance committee. The first time that i recall coming up about the possibility of selling, our available, for sale portfolio was in the fall towards the end of 22. It was decided that at that point it did not make the most sense. There was believe that the rapid rise in Interest Rates could create and would likely create a recessionary environment and rates would start to go the other way. In the beginning of 2022, 2023, we realized that was unlikely to happen. And when you say we decided to then sell the portfolio. Mr. Begor, the fed report notes prior to 2022, that Silicon Valley bank had Interest Rate risk hedges on some or all of its longer dated maturities. The fed report further notes over the course of 2022, the bank pursued a strategy of dropping those hedges. Could you explain why you made the decision to drop these hedges . Congresswoman, two points. I will get to the insecure question. The hedges that were in place again, set up by our asset liability committee, Treasury Team, were only on a portion of our available for sale portfolio, which was a much, much smaller portion of the securities portfolio. I dont recall the specific percentage, but it was a small percentage of the overall portfolio. As far as the decision to sell the hedges, that decision was made by our Treasury Team and our asset liability committee. Would it have been more beneficial to your balance to two of kepas edges as long as additional Interest Rate hikes were on the horizon . I mean, the fed was clearly going to keep raising Interest Rates . Congresswoman, i do not know the exact rationale behind it. I dont have that information. Such poor mismanagement, so reckless. So many paychecks, 2 million on the line, many of which, my own district, i am disgusted. Following up, mr. Huizenga, i like to follow this, talk about potential inquiries, you said they did not engage you, i want to tell if you are surprised the fdic to take you up on the offer, and if you knew how many required, you can send that to me in writing, thank you, i yield back. The gentleman yields back, the gentleman from massachusetts, mr. Lynch is recognized. Thank you, mister chairman. I want to follow up on the young ladies line of questioning. Mister chairman, i would like unanimous consent to enter into the record, an article from the New York Times dated december 15th, 2021. Without objection. So this article, basically it says that the fed had made clear, and this was december of 2021, mr. Becker. It says that a fresh set of Economic Projections released on wednesday shows that ben officials expect to raise Interest Rates, now set to zero, three times in the following year. This was december, this was december of 2021. The fed went ahead and raised rates seven times in the following year, but they said they would raise it three times. And you are still loaded up with long term low Interest Securities which were uninsured. So you are basically, you failed to anticipate the impact that a rising rate environment would have on those deposits, no . Congressman, as i mentioned in my written testimony, this is very important. Our Balance Sheet is constructed on acid side with securities, and also loans. Those loans are variable ratings. Meaning as rates rise, we make more money. So my view is you have to look at the entire you had 97 of your deposits or uninsured. 97 . Those are the first deposits to run, these are the canyons of bank deposits. Theyre on the fastest and they run first. And, you failed to appreciate what would happen when rates went up. But the fed told you, they made public their attempt in december, 2021 that they will raise rates. So i am just, i realize, is this the period where you dont have a chief risk officer, is this correct . No, it is not. It is not . So what did your risk officer advise you at that point . Congressman, i dont recall specifically what the discussion was around that. And i know again, my memory is that so, look. It should not take a risk officer to figure this out. I mean, look. You had 91 billion dollars of assets, locked into long term, low Interest Securities. 91 billion. And as rates went up in 2021, excuse me, 2022, the value of those assets plummeted. They went from 91 billion, to 21 billion. And everybody headed for the door. How could you not anticipate that . How could you not understand the impact of a rising rate environment on your deposit base . I do not get. This and i find it hard to believe that no one at the bank anticipated this. What is your response . Congressman, what is this specific question . The question is, what was your alternative reality . If you are not facing the facts, and if you are not acknowledging what is going on in front of you, what is the alternative scenario, the reality that led you to keep these . And many of this, so, this 91 billion in assets were held to maturity. So that really frightened people when you had to start selling those at a considerable loss, and actually realizing the losses of his strategy. And i am just asking for an explanation of why you did what you did in the face of what was going on. Congressman, its a complicated answer. And, insensitive looking at the Balance Sheet, you have to understand the assets. Again, our loans were very low rate. They benefited from higher rates. Thats part of the equation. The other part here is what gets me. Earlier in your testimony, you are blaming the fed for not telling you what to do. Not raising the Interest Rate issue with you, when you know, a High School Student in economics, or finance would be able to figure out the danger that you are in. Mister chairman, i yield back. The gentleman yields. The gentleman from texas, mr. Williams is now recognized. Thank you mister chairman. Full disclosure, i am a car dealer from texas. And mr. Shay, in the recent new York State Department Financial Services, Internal Revenue regarding review, regarding the supervision of Signature Bank, it showed that your bank did not develop a controlled framework in line with growth, did not have a liquidity Management Plan that manages risk profile. In the past, leading up to Central Banks collapse, regulators identified weaknesses of the banks liquidity Risk Management gets Signature Bank failed to act or remedy these warnings. You are in the position you are in right now because you failed to adequately manage or Liquidity Risk positions. So my question is when you were made aware of these Liquidity Risks, why were they ignored . Did you express any disagreement with the fed regulators findings when they were laid out to you . Yes. As chairman of the board, i was aware of these. And the bank was taking substantial steps to address, including a proven stress test modeling, approving other modeling, diversifying further deposits, portfolio mix, limiting the amount of deposits, seeking additional sources of liquidity, in terms of, additionally, and i mean including issuing brokered cease which the bank previously did not find insured, entering repurchase agreements, or arranging to get repurchase agreements, negotiating repurchase agreements to primary dealers, tailing lending to lower the amount of need for deposits, and maintaining a high quality, a high quality lending portfolio as well as a shorter term securities portfolio, consisting of readily marketable Government Agency and other securities. In 2022, we saw the federal open rocket committee raise Interest Rates at a speed we had not experienced since the 80s. And i remember the 80s. In a belated attempt to adjust a runaway inflation by the American Protection plan, which injected 1. 8 trillion into the economy, these rising rates cause the assets of the Silicon Valley bank that invested into the declining value, we know this, and when it withdrawals in svb began to rise at a rapid rate, these assets were sold and a loss. So mr. Becker, when the bank invested 80 billion in longterm work backed securities, was there a plan in place to adapt to rising Interest Rates and to reduce the value of these bonds . And miss wagner touched a bit on that. So congressman, a couple of points. One is that investments which were made in 2021, those were invested in government securities. Those are very playable. If you need liquidity, you can borrow against them. By the end of 2022, we had 69 billion dollars of availability for liquidity at the end of the year. The second point is that those securities actually paid down. Roughly 12 billion dollars per year of those securities would amortize down. That was from the health and maturity portfolio. We also had availability with our available for sale portfolio. And then, our cash. So when we looked at it, we believed we had adequate liquidity to support several different scenarios. Okay, and finally mr. Becker, the bank did not have a chief risk officer. You spoke about that for eight months, from 2020 to january 2023. It seems your team did not care about risk. Even though there were several warning signs, it brought to light, you and your team did not think to address the risk, and someone in place to mitigate this risk. So you didnt bring on a chief risk officer in january, but proved to be too little, too late. So quickly, mr. Becker, during the time that Silicon Valley bank did not have a chief bank officer, who is overseeing the framework, whatever if they do make to define and hire a qualified candidate . Congressman, i respectfully disagree with the characterization that we did not take Risk Management seriously. You had nobody in charge, but thats fine. We had a team of people, Senior Executives in the risk leadership positions. Liquidity office of this cfo, chief risk officer, reported to the chair of our Risk Committee. And we were actively engaged in Risk Management broadly across the organization, him being responsive for regulatory feedback. Cut like my car dealers, selling cars to a sales manager. I yield. The gentleman yields. The gentleman from ohio, mrs. Bailey, is now recognized for five minutes. Thank you mister chairman, thank you Ranking Member. I am not sure where to start. So, let me start with making this statement. I want to take a moment, mr. Chairman to acknowledge the hardworking americans, who were harmed by this glaring mismanagement in your banks. Public Pension Funds nationwide lost millions of dollars which were invested in the Silicon Valley bank and Signature Bank. In my hometown, in my third Congressional District home of ohio state teachers retirement system, took the biggest hit. Over 27 million invested in your bank. Meanwhile, with reports that have come to light since the banks collapse in march, we know that executives at your bank earned millions of dollars in bonuses, sales, increased executive compensation, while you ran the banks to the ground. I dont need to go through this, we heard it on both sides of the aisle, from failing to address supervisory recommendations, taking on significant Interest Rate and Liquidity Risks, and inadequately matching the bank. Meanwhile, teachers, like my sisters, firefighters, other Public Servants lost millions that were invested through your public Pension Funds. So let me do two things quickly. Mr. Scott ran out of time. So any one of you can answer his questions. Who made the decisions to continue with these uninsured deposits . We will go down the line, just give me an answer. Who made the decision. Mr. Becker . The decision is around our uninsured deposits, relates to our strategy, which is been our strategy so who implemented this strategy . Who made the final decision . The strategy direction of as vp. A source drawn it . Do you take this . Okay. Thank you, again and thank you earlier, for acknowledging and taking responsibility. Mr. Shay, we will go on. Your answer . Yes. Does that mean that you take responsibility . The strategy was to serve mid sized companies but do you take the responsibility for that strategy . Strategy is a word, who implemented it, who is ultimately responsible, is that you . That was the founding principle of Signature Bank. Same question. The board of directors, executive management had a successful Business Strategy that lasted for 37 years. Well, the clock is running, let me go to the next question, please. Okay, now i have heard you. Been there 30 years, 12 years as a ceo, a lot of time. Founder sends 2000, cofounder of Signature Bank. Ceos and 2009, to present. How much money did you make . What was your salary for 2022, 2023 and bonuses . Salary, and how much in bonuses . Dollars and cents. For 2022 . Yes. My salary was just over 1 million. By incentive compensation was one point 5 million. Next . My salary, my last salary was 900, 000, and 1. 7 Million Dollar bonus. My last salary was 990, 000, my bonus was 1. 5 million. Okay. Do you know, let me start with you, mr. Becker. Do you know what amar a stands for, and mria, right . I do. So same for everyone, you understand what that is, right . Okay. So mr. Becker, it the recent report on the failure of Silicon Valley bank, and the Federal Reserve stated it issued multiple supervisory issues on mra and on mrias. 31 supervisory issues pertaining to capital planning, and positions, liquidity, Risk Management, government control, all these strategies we all talked about, including the Bank Secrecy Act and the anti money laundering, okay . 12 of the 31 open issues on the mria. For those watching who do not know, when you put the i in it, it means immediate. That means it need immediate attention. Can you explain to me after three years, why we still had, and up to the collapse, you had not answered those 31 . Only 12 . Congresswoman, as i said earlier, we were extremely responsive to the regulatory feedback. In all the matters you are describing. Do you know about the 12 . Sorry, my time is running out. Do you know what they were . I cant speak to every single one, but i know i am sorry. My time has expired. The gentleladys time has expired. The gentleman from georgia, mr. Luetkemeyer, the subcommittee is now recognized. Thank you, mister chairman. I appreciate you all being here today. This is a very important issue, as you are all aware. Mr. Begor, did chairman barr ask about the chief risk officer for Silicon Valley bank, and yesterdays hearing before the Senate Banking committee you said this was spurred it is improper recommendations from regulators who are concerned about the experience. You tell us a little bit more about the specific concerns, that the fed regulators had about your cras experience . Yes, congressman. As i described yesterday, the feedback was observations from the board of directors, from the regulators, from myself, internal audit. As we started to approach 250 Million Dollar levels, looking at individuals, especially in the risk area who had that experience of even larger institutions, was the feedback that we were getting. So thats what we acted on. And according to her public linkedin profile, she had over a decade of experience in enterprise, Risk Management prior to her six years at svb. In her six years of employment with you, what role did she play, in developing the bond portfolio which contributed to s the bees collapse . Our chief risk officer with a sat on our asset liability committee, and shielded in a voted member on that committee. Given that i was not on that committee and that there was not part of it i do not know the discussions she would have had in overseeing the overall portfolio strategy. I understand it takes time to find good executives. But why did you decide to dismiss her without having a successor already in place . As i mentioned earlier, based on the feedback, we thought it was best and we consulted with the regulators, including the board, driving this as the chief risk officer, into the Risk Committee. It was decided that having our chief risk officer on board as a consultant that is available made the most sense, to be built out to our office, the chief risk officer, and have those Senior Leaders in Risk Management reporting to myself, and reporting into the chair of our committee. You felt that was better even than keeping her in an interim position . We did. It is reported that svbs Risk Committee met 18 times 2022, more than double the number of meetings in 2021. At any point during these meetings was the Interest Rate risk on svbs Balance Sheet discussed . Congressman, the 18 meetings where it for a variety of different topics, around governance and controls, and looking at the metrics around whats called a Risk Appetite statement. It is what level of risk are you willing to accept as an institution. So the Liquidity Risk would have been the main area where that would have been stressed. And that was definitely discussed. Do you remember when the first time that the Interest Rate risk was brought up . Again, my recollection was that Liquidity Risk was one of the metrics which was reviewed. That would have been discussed across many of the Risk Committees going back for a long period of time. Would you say that was one of the compelling reasons why you had double the number of meetings in 2022, then you had in 2021 . I would not say that was the main reason or the compelling reason. It was really overall, enhancing Risk Management across the entire platform, including governance. So we had changed the Risk Committee structure about one year earlier. We were making sure we had the right risk governors across the entire platform. I also want to clear up some confusion regarding the office of chief risk officer committee, and the Risk Committee. Where these two entities the same . If not, or they substantially similar in composition and function . So the office of the chief risk officer was actually management level. It did not include any board members. The Risk Committee was a board level committee. Okay. I see i am quickly running out of time. I wont have time for additional questions, i will submit those for the record and mister chairman, i yield back. Thank you, violent yields. The gentleman from california, mr. Vargas is now recognized. Thank you very much, mister chairman. I want to thank you again and the Ranking Member for putting this together. Appreciate it. I dont like being in the position of a failure, i am a religious liberal. I believe in gods mercy and redemption, and when somebody is poor, and does something wrong, i believe in redemption for them. And when someone is rich, you know, when they fail, i believe in redemption for them. So i will not stand here and beat you up, i will not do that. I am disappointed, obviously. I think as all of us are. I hope that you cooperate with the government so that we can fix some of the problems. One of the problems that i see is that it seems like the banks, all of your banks were reactive, not proactive in this situation. I think you are calling it unprecedented circumstances in advance. And i agree with those. When youve somewhat money, run out of the banks so quick, and digitalized, it isnt foreseeable. Not unforeseeable, but it is unprecedented. What can we do to begin, i know those on the other side of the aisle think of deregulating the situation like this, probably most of us on the aisle, certainly me, i think of regulations, not deregulations. What can we do in this situation, the ones we find ourselves in, for banks to not have this problem . I see that this could affect virtually any bank except for the really big ones. Anytime social media, or short sellers decide to manipulate the stock, they can do that quite quickly through social media. All of the sudden, money can be moved. What can we do . What can the government do to prevent this so people dont lose their money . Who would like to take it, roffler, why they took a shot at this first, mr. Roffler . Sure. Congressman, thats a very good question. Obviously one that, reflecting on the last 60 days, i thought about frequently. Sitting here today, its hard for me to give any good advice for that. Because as we learned through march 9th, we were in a strong position. Yes, 2023 was going to be a bit more challenging. 2022, from an earnings standpoint, but when contagion hit after the failures of the banks, panic sets in. So i think my recommendation to others would be but sorry, for example, panic hits at wall street, we put in triggers, things that slow the system down. Is there anything that we could do for that . Could we slow the system down . I think the Banking System is sound. It is resilient, it is sound. But theres always the opportunity for panic, its always the opportunity to make money off of panic. Not everyone lost money in this deal, short sellers made money. You know, i think we need to investigate them and find that what happened. Is there something that we could do, some trigger, something that the government could put in place so we dont have these runs on the bank . I would share that on march 12th, i think the adopted one of the landing programs, which banks could utilize. I think banks did utilize that successfully. So i think that was a good step. But at the end of the day when the panic sets in, it is hard to regain confidence. So absent some evaluation of the insurance on deposits, which i know the fdic i think is requesting or, our proposal, i think that is one thing that would be worth looking at. Because that could at least calm the waters. I will ask mr. Shay that same question. Thank you. I cant give you a solution, but i can tell you what i believe is a problem that needs to be fixed. I certainly saw, it felt that friday afternoon. It was literally nothing customers did not want to hear, anything that i spoke to. They just wanted to get to, i remember, i need to get my money to Jpmorgan Chase because the government wont let them govern. I need to go to city bank because the government will make sure that they save them. They were panicked calls, are you to get my money to big to fail bank, because, im not a bank analyst, i dont know banking, im just running a plumbing supply, running a school bus, operating business. Im running a Health Care Provider service. Most of the time, deposits well in excess of the insured, they did not want to miss payroll. So it was really my time is up but i appreciate your answer today. I do think we need to take a look at that, i think when the panic sets in, there is no way to stop it in this situation. Thank you, mister chairman. The gentleman yields back. The gentleman from tennessee, mr. Rose is now recognized. Thank you chairman, Ranking Members, thank you to our witnesses for being here. I know this is not an easy environment. I appreciate you being here to share your insights with us. I want to back up, if all three of you will hang with me for a second, and go back three years or so and think about where you were and what decisions you are making in your banks, and then lets imagine that you could have seen forward, that your crystal balls were working particularly well. If you have known, i will start with you, mr. Becker, if you had known in 2022, inflation would reach a 40 year high, would you have managed the bank differently going into that period . Congressman, i think about your question a lot in hindsight. I think that is very hard. I go back and think about the decisions that were made. We did not have access to that information. We only had the information which was available to us at the time. But lets imagine that if you had known that, and if you could have anticipated the my guess is you are they different choices, is that true . I think if we knew prior, to making those decisions [inaudible] the attendant rising Interest Rates, he wouldve made different decisions, right . I cant say to what we wouldve done hypothetically, what i can say is that the plan but Signature Bank presented going on monday, march 12th is something we are entire portfolio taking any losses that were there and still, were well cannibalized, with every regulatory definition, Signature Bank portfolio, available for sale, it was out of control of the Interest Rate risk. There is not a substantial it was an issue, but not one which would have caused the bank to not be well capitalized and under regulatory standards. Mr. Roffler . Frank you for a question, mister congressman. I thought about this a lot. The reality for the last three years, frankly, the 37 years, [inaudible] we will continue to do that, we gauge the board, regulators. So i governor, i want to get through this. 3. 6 million stock personally which weve been right about that time and i was on the process was into the january six. You in that this was going on, the Jurist Committee sign off on that sale . The process, and this has been the process for as long as i have been in the bank, is that when you want to sell stock and put together these plans, it is viewed by our legal team. But given the timing, you understand my question . What is the Risk Committee, did they sign off . Was it just that they were notified . I do not know, i dont think the risk committed been notified, it was the legal team that wouldve concurred. You mentioned several times Interest Rate prior to 2023, you are insured against Interest Rate volatility . Can you clarify that question . You said you do not recall concerns they have an exposure to Interest Rate risks. Yet, you slow down 97 of your Interest Rate hedges on your available cell portfolio during 2022, was there a concern that you are over insured against that risk . Because there was a decision made to essentially take on long term risks in exchange for short term transfer equity . As mentioned as far as the decisions around the edges, two points. One, it was against available for sales portfolio which is the smallest yes, but it was 97 . You started with 15. 3 billion insured, and the 2022 with 5. 6 3 million insured. Were so, what answer the rest of the response for the record in writing, and we will take a brief five minute recess to allow our witnesses to take a quick break. I ask that they return promptly, and we will return in just a little after the top of the hour. The committee stands to recess