Transcripts For CSPAN2 Failed 20240706 : vimarsana.com

Thursday morning on cspan or on cspan now free mobile app up or discussion with your phone calls, Facebook Comments Text Messages and tweets. Bank executive from Silicon Valley bank, Signature Bank, and First Republic bank testified on the recent failures of joint subcommittee hearing. Rapid growth, Digital Assets and rapid deposit withdrawals were contributing factors that led to the collapse of the respective institutions. All makers asked about executive compensation and Risk Management. [background noises] Mike Emmanuel come to order. Joint subcommittee is titled continued oversight over Regional Bank failures. That objection all members will have five alleged days within which to submit extraneous materials to the chair for inclusion in the record. Without objection a chairs office to declare a racist of the committee at any time. With that i now recognize myself for four minutes. Todays hearingng will help the Financial Services committee learn more about recent Bank Failures including management missteps, supervisory f failure, rapid fire bank rent the age of social media. I think our witnesses for i testifying today. The recent banking crisis was fueled by failed Bank Management lack of hedges against Interest Rate risk, failed of Monetary Policy failed supervision overspent by divided divided administration democrats that led to historic inflation promptly 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 waiting to get information from federal regulators about what happened. Information has been provided to the Government Accountability office but is not found its way from federal regulators and treasury to this committee. Instead, individuals of the fed, fdic state regulators all decided to do their own self assessments of the recent bank and supervisory failures and hastily put out t public facing marriages 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 to increase transparency and accountability of federal radiators and actions especially when emergency measures are employed. We are not here to defend management at any of the banks that failed or to put anyone on trial for prosecution. Looking at the recent Bank Failures the continued turbulence under Banking System its important to acknowledge the Bank Failures did not occur in a macroeconomic vacuum. We have seen runaway inflation fueled by reckless, nearly 2 trillion American Rescue plan march of 2021 personal savings economy wide was already down 5. 7 trillion. Relations continued to hammer American Family the Federal Reserve was late to respond. Because the Federal Reserve failed to tighten Monetary Policy and timely manner Interest Rates are posted at the fastest pace in modern history rapid Monetary Policy shock Interest Rate risks into the economy late in responding over increase supervisory vigilance the hasty resume of regulators banks have missed failed risk gaps at supervisors and examiners identified and sometimes were not adequately responsive or timely in taking remediation spread according to theirrat narratives regulators e staffing issues maybe could have been more forceful in working to get time vacations. Yet, some possibly important issues are brushed aside by the regulators reviews. Argument Bank Failures years of work from home because of code restrictions. That fact received only a few sentences in the offense report on svp, identifying only the bird sergeant at the se Signature Bank for the word covid provides onene instance. I seen such a factor many others gloss over the regulators reviews deserve more scrutiny. Hastily produced reveals by regulators, corny for public release from the same date calls into question the extent to which narrative setting rather than establishment actual facts was a motive for the reviews and public reports. Those reviews were led by individuals for fdic fed. Not for the full boards they provide only limited cited story. I welcome the views and information that will hear today. Thespecially considering the lak of transparency and accountability from federal regulators. I note recognize the german or rather the Ranking Member of the subcommittee and Financial Institution Monetary Policy the jennifer illinois, mr. Foster minutes. Think it was richard think our witnesses for appearing here. In march of 2008. Its an interesting time to be a new member of the Financial Services committee barely spent my first three years on this committee. First time dealing with the crisis. Secondly to identify words that werent. In deciding what had to be repaired. Thirdly the regulatory response. Until a couple of months ago had a pretty good record of preventing a largescale Bank Failures and financial crises. The financial crises we are dealing here is magnitude smaller. Keep that clearly in mind. When a machine breaks prep identify that broke due to a design flaw or did all the parts work as designed . Was it subject to unanticipated conditions design assignments specifications and warranty. That is allotted with the series is about. We have in front of us some ofio 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. We also have to look at theha changes that have been made externally having to do people are terrified now which banking runs happened. Imagine whatin happens in a few years everyoneat is for using their check gpt money manager which will be programmed to pull your money out the minute a banking run is detected by the system. How much liquidity to help the folding insets on the environment . The environment is changing. Everyone played their roles as appropriate to the rules that were in place a few months and on the previous years on ford to this hearing, thank you youll back. What the judgment yieldspl mr. Huizinga from michigan performance. Thank you chairman boris should say. I am glad we were able to proceed with this joint subcommittee. This is important to work that, we do on these various subcommittees dig into the details and find out what i think are some of the mostee challenging issues that we have experienced economically here in the last couple of years. I doing to say thank you to the witnesses for being here. Because this hearing from you is vital. Its of vital is this committee continues its investigation into the recent failures about the Silicon Valley bank and First Republic banks. And in testimony today we are going to hear i imagine some try to pin the Bank Failures solely on bank mismanagement. Some will try to pin it solely on failed supervision. Some on unprecedented runs on deposits fueled by social media. Think the reality is, everybody appear realizes that it is a combination of all three of those things. Coupled with high Interest Rates, years of easy money as a chair with highlighting, this administration and the bed overheated our economy and relate to pump the brakes or borrow the punch bowl analogy from alan greenspan. Newman has occurring to take the punch bowl away from the party. The ready to let off the hook and maybe try to change the narrative. It should not be understated each of the banks is questionable at best. Your inept at short and longterm risk. Risky businesses, tech untenabl Financial Risks and ultimately failed to respond to rising Interest Rates. Mr. Becker your relationship with sanro francisco fed shoulde scrutinized. At the time of its failure svp had 30 went open supervisory failures or warnings from regulators. And yet nothing wasit done. It was not done unnoticed your position on the federal board of directors potentially created a relationship that impeded supervisory judgment and created some of that leniency. And for their part the Federal Reserve missed or ignored all of the signs. When they did react he was too late. Yesterday, testimony before thee committee device is a supervision, mr. Barr the other mr. Barr at the Federal Reserve admitted what we have known for months. Failure ofce your banks as a result of failed supervision under his watch. He finally admitted he had the responsibility of that. However federal regulators will attempt to use these bankk failures to exercise well outside the bounds congress established for them the notion these families will result regulatory changes iss unfounde. As we hurt the gao the reports about the fed started in 1991, not 2155 it was 1991. Nevertheless regulators try to shift the blame but facts are clear testimony before our own subcommittee last week she a oaf like those concerned supervision and enforcement practices going back to 1991. The report concludes all three federal financialas regulators have quote wide discretion in choosing from among Enforcement Actions of varying severity. Lastly independent assessment of these events not only appropriate but it is desperately needed. This committee is committed to providing the american taxpayer with unfiltered review of these events that preceded the bank collapses ultimately they bear the cost of your failure. Look for to hearing from each of you as we continue seek these answers and mr. Youll back the balance of my time for christ i note recognize a gentleman from texas Ranking Member of the investigation subcommittee to green for five minutes request thank you,of mr. Chairman. Mr. Chairman, holding this oversight hearing. The former chief executive of Silicon Valley bank and Signature Bank will allow important questions to be asked. Answers to be received from those who nurtured the root cause of their banks collapse. At yesterdays hearing regulators acknowledge their shortcomings. Todays preeminent question is, will todays and bankers acknowledge faults . Will they take responsibility for the more than 70 uninsured deposits that alarmed depositors . Will they acknowledge Silicon Valley bank Signature Bank experienced outside growth between 2018 and 2022 . And the Signature Bank grew from proximally 47 billion in total assets in 2,018,210,000,000,000 in 2022 . That Silicon Valley bank inincreased 56 billion to 209 billion over that same period of time. Will they admit this outsizedt growth in assets was fueled by more than 70 uninsured deposits of both banks . Higher than the median of 32 of comparable bags. While they confess the executives of both banks knew or should have known that Risk Management practices and to be strengthened up properly 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 agreed those who nurtured the root cause of a banks collapse should return any bonuses received as the collapse came toca fruition . Will they allow and a vow that upon Silicon Valley bank having received 13 of the most serious supervisory warnings a fed can issue, the banks officers should have taken corrective action and, will they come clean about Signature Banks failure to take corrective action after having received nine matters requiring board attention notices from the federal Deposit Insurance Corporation . Including three specifically related to liquidity or Risk Management . Mr. Chairman, the time for atonement 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, competent, qualified. They all have degrees indicating such and they have experience promoting such. They should have taken corrective action but we have given the opportunity answer these questions i called to the attention of not only this committee but also of this country. The people of america need to know what happened at the spirit this is a time for us to find out in the guild that the ballot box the judgment yields back. I note records and chairman of the full committee, mr. Wuhan for two minutes per grade so it that they chairman barton at Ranking Members as well. Todays series we will hear three different stories from three different banks. Hert Business Models were not te same. Your depositors are not the same. Thefr degree of mismanagement ws not the same omits this crisis for the truth is each of you bears responsibility for the captain of your respective ships and we have heard that from you. There was a Storm Brewing and you failed to batten down the hatches. And while inflation raged the fed to the bite administration told us it was transitory, nothing to worry about. We will into the management question shortly. But one of the u mistakes though is these three bankers actually believe the bureaucrats. We all know inflation is not transitory after being late to respond the fed was forced to raise rates the fastest pace inn modern history britt again they failed to appropriately prepare for this environment. Silicon valley bank was the projectilere set this volatility into motion. Bite administration used another word to describe. Idiosyncratic. Clearly there are three of you today. Three of the 30 largest banks in american history, in America Today the problem goes much deeper. These subsequent failures of signature and First Republic coupled with the volatility regionaln bank stocks sent shockwaves through a financial system. The fear of contagion is rocked and already shaky economy. So we will hear from each of you today at new york and California Bank regulators as well but its important to take a step back really exam the undercurrents the causes crisis. Economic miss by the bite administration perfect storm, that each of you failed to write your ship in. I yield back. So judgment yields back but today we welcome testimony of mr. Greg benkert former ceo Silicon Valley bank mr. Scott shay cofounder jeremiah Signature Bank and mr. Michael roffler former ceo present First Republic bank. We thank each of you for big taken the time to be here for you each be recognized for five minutes giving oralro presentatn of your testimony without objection each of your written statements will be made part of the record. Mr. Becker you are now recognized for fivel minutes. Chairs, bar and Ranking Members of foster and green and members of the subcommittee. Thank you for the opportunity to appear before you today. My name is Gregory Becker i was the ceo of siliconem valley ban. I am here today to answer your questions about what happened at my memory. Best of at the outset i want to be clear and never envision myself being in this situation. I was an employee for svp for nearly 30ea years and ceo for te last 12 years until his taken over by the fdic. I believed in the bank at its mission and cared deeply about our more than 8000 employees and their families. I was committed to our clients and helping them succeed whether they were wellknown Tech Companies or Small Business founders and towns across thete country. Sdb was meant to meet the designs of technology and industries were started to Later Stage Companies can keep the deposits while to expand their businesses and create jobs. We knew our clients personally, understood their needs and goals and partnered with them as they grew. We took Risk Management seriously and work closely with ever responsive to the various regulators who oversaw svp. Over time we built an expanded team of subject Matter Experts focus on analyzing risk and protecting the bank. We continually sought to add operational expertise and experience to enhance our Risk Management the bank and its clients involved. Much as been said about the takeover at bp by the fdic and happened. Ultimately, i believe sdb failure was brought about by a series of unprecedented events. Between 2,152,019 grew from about 45 billion in assets to 71 billion in assets added annual rate of about 10 . This change in 2020 due to the covid 19 pandemic the government stimulus measures. With near zero Interest Rates the largest governmentsponsored economic stimulus and history more than 5 trillion flooded into commercial banks in the united states. By the end of 2020 svp has grown 63 over the prior year ending 2021 assets grew another 83 to 212 billion. To support this growth exit beat beat more than 8 of new capitol in 2021. Importantly, throughout 2020 untill late 2021 messaging for the Federal Reserve was that Interest Rates would remain low the inflation is starting to bubble up would only be transitory. During this time sdb invested in a low risk highly rated governmentbacked securities. These securities werery safe assets. They are 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 complement our short durationve Loan Portfolio of proximally 90 of which had variable Interest Rates. In fact, other u. S. Banks. Collectively invested nearly 2. 3 trillion other securities portfolios in this low yield environment created by the ,Federal Reserve. To account for changing market conditions, namely higher Interest Rates anticipated over a longer period of time, on march 8 we sold sdb available for sale Security Portfolio and planned capitol raise. Unexpectedly, on the same day Silver Gate Bank to bunch of the wind down and liquidate depositors triggered a run on that bank. Despite stark different center Business Models, news reports of investors wrongly lumped svp and silver gatee together. Rumors and misconceptions quickly spread online culminating on march 9 with the first ever social media driven bank run. We withdraw in 10 hours or roughly 1 million every Second Period over todays approximate 80 of total deposits were requested to be removed from sv b. To put unprecedented at this bank run in context, that largest bank run in u. S. Historf was 19 billion over 16 days. In the face of these unprecedented Events Leadership Team and i made the best decisions we could with the facts wa and forecasts available to us at the time and in the best interest of svb, its employees, and its clients. I worked at a place i truly loved. Alongside our dedicated employees to support our clients who are innovating in astonishing ways. I believe sdb had a positive impact on the roughly 100,000 clients. Oxygen one time has expired. Mr. Kent to your readinesss. For five minutes. German bar, chairman, Ranking Member foster, Ranking Member green and members of the subcommittee. Thank you for the opportunity to be here today to discuss Signature Bank and my role as chairman of the board. In 2008 cofounder Signature Bank the time the Banking Industry was experiencing manyor mergers. Many big banks are not serving needs in a market to customers back on the mid site bank would provide important commercial service to businesses that preferred a smaller more personal experience. Signature bank followed a single point of contract approach. In which the banks client teams personally serveve the needs of small and mediumsized businesses. Our bank had a Diverse Group of clients including industrial companies, commercial real estate firms, healthcareth providers, professional service, nonprofits and many others. Replacee the priority in providing financing to Affordable Housing providers for low and moderate income areas. And did so for many years. Through the hard work and dedication of our employees and from a small bank with 40 million for a successful middlemarket bank with more than a billion dollars a hundred billion dollars in deposits. We were solid and thriving bank that played an enormous Important Role in our clients businesses and i was very proud of our success. In 2018 we began accepting deposits from businesses in the Digital Asset sector by supporting this effort because i believe digitald asset payments to make Financial Transactions faster, easier, and cheaper. With funds but from place to place in minutes rather than hours or days. At a much lower cost than traditional payment systems. I was not alone in my enthusiasm for Digital Assets. Over the years many other banks, at many financial, and others have entered the market for Digital Assets and governance both state and federal have expressed support asci well. As with other parts of Signature Bank business, digital deposits grew over time. Nonetheless, because this was a relatively new sector Signature Bankrt carefully monitored in an effort to mop clients met internal standards including for compliance with anti Money Laundering laws. We also limited the kinds of businesses that we would do. Signature banks Digital Asset business was focused on accepting u. S. Dollar deposits from businesses in the sector. Additionally a publicly supported increased government regulation of Digital Asset sector in order to ensure businesses operating within the sector at regulatory oversight. In the latter part of 2022 the Digital Asset sector experience increased volatility regulators expressed concern. Signature bank took these developments seriously in a few months significantly reduced asset deposits Digital Assetet deposits. Unfortunately series are truly extraordinary unprecedented events unfolded quickly. March 7 the bank with strong ties to Digital Asset sector announced it was going out oftu business. Three days later on march the second a second bank was closed by the regulators. And then, within just a few hours our depositors with through billion dollars in the bank. Nonetheless i was confident Signature Bank could slip saint. It was wellcapitalized, the bank was solid. Indeed it was always solid. But thats as in excess of liabilities even at the very end theba bank had a welldefined ad solid plan to continue in operation withstand additionalit withdrawals. Although i believe the bank was visited by things different. On sunday march with regular sees Signature Bank. Although i disagree with this decision recognize Important Role the Bank Regulators play in our financial system. First priority in helping develop Signature Bank was providing Excellent Service to our customers. I was therefore pleased thehe governmentmy guaranteed the full amount of customers deposits. Helping build a bank that for 22 years played an Important Role in the middlemarket sector of our economy was the pinnacle of my professional life. For that reason march 12, 2023 was a devastating day for me. Then what yields back. You are not recognized for five minutes. Thank you for chairman mckendrick, Ranking Member waters, german bar, turn huizinga Ranking Member foster, Ranking Member green and members of the subcommittees, good morning thank you for allowing me too speak with you today. 2009 i 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 and integrity as well as our understanding of the unprecedented banking crisis that affected us beginning on march 10. I like to start by thanking my incredible colleagues who have worked tirelessly since march 10 continuing to serve our clients and delivering Outstanding Service invasive 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 and transparency what our regulators and the public. First republic financial position strategy were regularly reviewed by our regulators. The california and the fdic. First republic Management Board of directors trick regulatory feedback, extremely seriously. And address any manners in a timely matter. Either regular expressed concern regarding First Republic strategy, liquidity or management performance. Just the opposite. Up until the cataclysmic events of march 10 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 is strong Investment Grade ratings aligned with the nations largest banks. In fact, thanks to our employees extraordinary efforts First Republic at its most profitable year ever in 2022. Starting in the following 2022 First Republic believe thehe 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. F known at First Republic could have predicted the collapse of Silicon Valley in signature. This speed at which it happened or the impact it had on the Banking Industry. Unscenteds on the template decrease running Student Interest pressures, First Republic was contaminated overnight by the contagion that spread from the unprecedented failures of those banks. Before it march 10, First Republic was conducting business as usual. And did during the debt uncertainty surrounding Silicon Valley group, we experienced a significant inflow of deposits that First Republic from clients would withdraw their money from Silicon Valley. Everything changed overnight. The morning of march 10, when Silicon Valley collapsed a run on First Republic began. In response to industrywide pandemic about the soundness of Regional Banks, industrywide panic about the soundness was exacerbated by traditional media and social media. Over the course of thel ensuing weeks over 100 billion and deposits were withdrawn from the bank. Despitese herculean efforts by y incredible colleagues, at First Republic to continue providing Exceptional Client Service management tireless efforts to save the bank and the support of 11 of the nations largest banks investor and depositor confidence never recovered. That the spirit and courage colleagues to be there for him to serve the needs and requirements. But clients continue to withdraw their funds. To protect your client to depositors the fdic reached a purchase and assumption agreement with j. P. Morgan chase to assume all the deposits and substantially all the assets of First Republic. We continue to work hard every day to ensure our clients receive the service they deserve. I look forward to work with the committee to restore confidence in the Banking Industry. I would be pleased to answer questions. I think the witnesses for their testimony. Will now turn to member questions but i will a recognize myself for five minutes. Let me start by following up on a line of questioning pious vic chairman bar yesterday. And i asked mr. Barr at the delay and Monetary Policy normalization and later persisted in high inflation, i asked him if gradually tightening monetary policies virtually precipitously raising rates would have madee it easier for the fed to supervise banks to manage Interest Rate risks . He declined to acknowledge Monetary Policy failures by the fed for the underlying cause of the current instability in the system. While i do agree with responsibility bank and management to manage Interest Rate risks i believe it should alsoo acknowledge the feds on precedent and protective money policies and keeping Interest Rates too low fore too long necessitated historically rapid and precipitous increase in Interest Rate 3500 basis points in just 13 months. Link to a blunt and difficult Interest Rate environment for institutions to adjust too. Mr. Becker, did Bank Supervisors at the Federal Reserve of San Francisco show any extra attention to Interest Rate they didissues and if win that they begin to show that attention . Next to my memory the rapid rise in Interest Rates were going back to 21 i do not remember that coming up to the best of my recollection. You are telling me as a San Francisco fed 20 Bank Examiners in your bank every day not once in the last year jury member any of those Bank Examiners discussing Interest Rate sensitivity with you . Y withnc me . Again my memory is no. I could have happened with our Treasury Team or cfo but i do not remember having a direct that. Sation about mr. Benkert Silicon Valley bank to have a chief risk officer eight month leading up to its value. Clothe their major Interest Rate risks that obviously were not being discussed by the bank regulars with the all but it is safe to say chief risk officer would have useful addition to the Management Team. What we are conversations with the fed on this issue did they voice any concerns with the vacancy aa request to take actin to fill the position . And if so how did you respond . Chairman, as i outlined in my written testimony towards the end of 21 the beginning of 22 our board of directors and the regulators of the Federal Reserve were givingg us comments about the need to enhance our chief risk officer position. Especially as a Research Approach 250 billion of assets. We took that feedback very strongly. We decided to make a change. Asso we did two things knowing that it takes quite honestly a while to find the best candidate for a role. A Mock Assessment 66 nine months to find executive of the caliber you would want. We did two things to make sure he didnt haveat gaps during tht period of time i wish both of those things were noticed before he made the change communicated to the federalhi reserve. First we created a chief risk officers Leadership Team with the risk team along with new hires with experience. Those individual reported to me they also report to the chair of our Risk Committee for the second thing we did, we kept our existing chief risk officer on board as a consultant from april until october 1. Our nerve chief risk officer started orr retired october and then she started in december. Is that the fed express any concern despite getting an office there is not a position filled . They did not. Okay is our understatementes prior to entering receivership youte have viewed all options on the Table Including the sale of your bank. Did you discover the difficulties you face in finding a potentialer acquirer . What city did turn up your my picklist my apologies thank you, mr. Chairman. Following the events ofr . March2 intent shortly thereafter we work with our Legal Counsel and are independent advisors look at all options on the Table Including potential merger, potential sales of assets. Of the fdic begin to gather and distribute data about your bank prior to the week of april 24 . Not to my knowledge progress mre move more quickly in finding a buyer for Silicon Valley bank saving the hit that theyd showed more urgency in setting up data rooms can you explain your perspective on how this process works are the fdic couldve donet better . Again, this happened very fast. I march 9 which is really the first day the bank run started, the fdic got involved. The mate took over on the tenth. We immediately worked with them and work as fast as we could to build a data room with a list information they were looking for. Ask my time has expired obviously it was not fast enough. I now recognize the ranking mentor sub communities Monetary Policy mr. Foster for five minutes. Thank you mr. Chair. Mr. Becker i except we said you never envision a situation in Silicon Valley bank. But my focus here is what rules could have been in place that wouldnt change a behavior question mckay met he a lot of last few weeks thinking about what you shouldve done if you had perfect knowledge ahead of time. High on my list is hedging your Interest Rate risk instead of apparently removing simple Interest Rate hedges and also raising suppercaseletter summer when they still could. Other other major thank you wish you had the foresight to have done . Post on the may be at one point on capitol raising grid or capitol ratios even up until march 10. I understand rate with rules changes is to make you immediately recognize some fraction of your market losses on securities. One of my followon questions are what you could try answering now. Immediatelyu had had to recognize one 100 of actual losses, without of affected your behavior maturely . Ask congressman, its in two categories one is your availableforsale portfolio. All of it is to take an extreme case, all of it. Yes think a bill for sale and held to maturity market to market we wouldve had to raise more capitol. What happen early last summer probably would Interest Rates are goingla up . Yes. When works in all probability you would be solvent today that had beenr the rule . Not saying that should be the rope there is a knob we can address which is what fraction of the market to market losses should be immediately reflected. Congressman as i mentioned in my testimony i believe this was unprecedented events. At the end it was fueled by the fastest bank run in history. I dont believe, my opinion even with additional capitol if that were to occur i do f not think e could possibly any bank could have lived with that amount of deposit outflow cap next short period of time. Are many, many issues there. There also governance issues. So some fraction of the regulatory findings would automatically have been made public. Particularly the governmenti ones. One of the things that makes us hard for us in congress to deal with is a lot regulatory actions have to take place in secret. If there are some fraction things for example t governance that would automatically become public with that have solidified or lit a fire under you to act more quickly on the risk . Congressman the first discussion that i recall having with the regulators on questions of governance was in january 22. As soon as those conversations were had we immediately reacted to that feedback we did not wait until the may 22 for the may 22b immediately reacted to it and put together a whole series of programs and processes to make the improvements that were requested. I dont believe. You dont think the threat of making public wouldve accelerated that at all . Okay. So, if during the period of your rapid growth you would been forced to issued contingent as asian banks and european banks are forced to do, this wouldve forced a conversation with the bond market as to the risk position of your bank. That would also provided a capitol buffer you would have had access to when you got in serious trouble. This is materially change your behavior or the results . What you can answer that is a complicated question floyd to answer that in writing for the record i would appreciate it prove that is one of the things both charm and i think maybe part of the solution here to make orbit stable Banking System i would be interested in your thoughts frequents congressmans written might written testament do not have access to my information from the bank. I would do my best of the information i have to be able to answer your question. It will not be exact calculation of what would have happened but i would be interested in your opinion. Mr. Shay the most significant was not soca much a concentratin of Crypto Assets or deposits but a lack of legible assets immediately available for gnliquidity support. Other changes in procedures or rules to make that more agile . That you wouldr advocate . I do not of the to that question. I do know that when we opened at the beginning of march 10. 29 billion of legible assets that work at the bankh, and Federal Reserve. In terms of the ease of moving those assets, that was something that could be looked at. Are going to have to move on the gentlemens time has expired for networking is a chairman of the subcommittee on oversight and investigations for five minutes. Thank you chairman. Appreciate the witnesses being here and your candor. Im going to ask you two of the most important questions frankly will going online ask you this. Versus whether you take responsibility for the failure of your bank, mr. Becker . Is ceo you got to take responsibility for the ultimate outcome of your institution regrets appreciatee that. Mr. Shay . What is chairman of the board i think i had a responsible role throughoutth. This is Second Period do you the responsibility for the failure . Im sorry that the bank was seized by the regulators. But we had to quit about your depositors are too. Okay i take that as a no. Mr. Roffler . Mr. Chairman this is an event thats unforeseeable what happens. The contagion spread very quickly in panic is very hard to control. What i feel responsible for is for our colleagues each and every day and our clients each and every day to make sure they are taking care of and supported during this time the quickset also sounds like a nurse or congratulations mr. Becker the owen to man up and take responsibility for that. So i will start with you. Since i cannot get the other two toon actually admit to their own failings. I like to hear from you, what would you have done differently in hindsight . Congressman, the question to the point made earlier but foster ive thought about that a lot over the last several months. When you look back with hindsight what couldve been done differently its very challenging. When you go back and make decisions you have to look at the facts you had. What i tried to describe my written testimony is the fact that we had when i had we made our decisions and i believe my had when they made their decisions i truly do believe they made the best decisions as did i with the information that we had regrets for going to explore that a little more. Yesterday he testified as to be cap liquidity were validated by regulators in 2022. Your written statement points to august 22 letters sent by regulators that conveyed the secondhighest camels ratings of a two meeting satisfaction liquidity, capitol market risk despite a downgrade of liquidity rating in august when you receive the supervisory letter, or this writing cause for alarm . Did you confirm you are on track . Inghe also want to address someg said to chairman barr pretty said the fed did not talk to 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, again im going based on the best of my recollection. I do not recall a direct conversation about that. I note towards the endgr of 22 there is matter requiring attention Interest Rate risk that was issued. I was not in that meeting for quick he said late 2022 . Ably those late 2022. Alright so until that time just as you had confirmed im confirm what youre saying determine bar this was not an issue for the regulators . Congressman, again to the best of my recollection i do noh recall. You had a memorandum of understanding to target matters requiring immediate attention. What were the major issues at that mou to your knowledge your recollection questioned congressman if i could clarify one point. The memorandum of understanding was never issued. It was verbalized to us. And it was verbalized to us in early 2022 regrets it does not sound like a memorandum that sounds like a conversation understanding. Okay alright, did regulators follow up with you on the status of this mou conversation or ask for your timeline or give you a timeline . The mentioned earlier we were incredibly responsive to the feedback that we received. Wrote quickly. We got 30 seconds you testified yesterday you offered several times to the fdic to quote engage potential acquirers run through a list of the names who you believe will be most likely acquirers. Every single bank of every tech to become small, mediums always had conversations with competitors who might becomees allies. You stated you offered your assistance but the fdic never consulted you in this. Can you confirm that and why you think they didnt . Did they give you any indication when they had no interest in your opinion on this . Congressman i can confirm they did not engage me in reviewing the list are talking about any potential acquirers. Our seo back. Gentlemens time has expired. I noter rick and his Ranking Member at the oversight investigation subcommittee mr. Green for five minutes. Lets thank you, mr. Chairman. Chief executive officer becker of Silicon Valley bank, were you a board member of the Federal Reserve bank of San Francisco . I was. Educator bone banking . Are you educated well and banking . Ive been banking my entire career. Eat republicans, my colleagues whom i i love dearly they seem o believe failure to sufficiently punish you as a cause of the banks failure. They have been alluding to this for dayss now. Perhaps even weeks or more. He intended because the regulars did not punish you properly your bankin failed . That would be a yes or no, sir. Congressman,. Server that will be a yes or no. Are you contending the failure of regulators to punish you properly is a cause of the failure of your bank . Congressman. That would be a yes or nurse. You contend that the failure, sir, the regulars to punish you is the cause of your bank failure . Congressman we were responsive to theof regulators. The question is not whether you were responsive. Please are you blaming the regulators for not punishing you . If they would have punished you is what youre saying that you would have done better, is that we are to understand the man who sat on the Federal Reserve board, highly educated, is that we are to understand . Congressman is a articulate my written testimony as a series of unprecedented events all came togetherer. Quickset is not the question. You see, the question is about you, your experience and whether you are now going to blame a lack of punishment . You do not want to differ with them. They coddle you i understand that this is a time for truth. You ought to speak truth sir. You know the failure of regulators to punish you is not the reason your bank failed. Congressman i believe the regulators Management Team did the best they could with the information we. Thinking that is sufficient 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 at fault for they have some things they could have done perhaps and should have done. But at the end of the day according to the Accountability Office and according to the regulators who were here yesterday, the banks failure lies with the banks. Let me ask you another question. This will apply to all three of you. Raise your hand i cannot ask you individually i do not have enough time. Any of you conferred with the president about Risk Management in banking . If so raise your hand. Any of you President Biden. Theres a reason for the question. Let the record reflect no one has raised ao, hand. The contention for my colleagues as this is allat president bides faultas. Because of President Biden used somehow made mistakes in your Risk Management practices. You did not talk to President Biden. Do not base your decision on news reports about Interest Rates that you cannot validate or at least have your Risk Management people they be some confirmation of. Any of youou think president bin cause you to make the decisions you have made . If so raise your hand. Let the record reflect none of the witnesses has raised their hand. Finally this, do you think the bonuses received, mr. Becker chief executive officer, should be returned question at the bonuses received at the time of the collapse of the bank should be returned . Congressman. Though be a yes or no. Do you think they should be returned . Congressman i will cooperate with the process. We are going to have some clawback legislation viewed cooperate with the yield back progresses and one sign is asked by the gentleman from florida mr. Posey is now recognized for five minutes. Thank you very much german. Member on the other side said h. Other 2008 he was reminiscing some of the circumstances. They were not very pretty. But one thing that wasas resolvd by the party in charge at that time to make sure we never had another bank failure or an economic crisis they established cfpb. The Consumer Financial protection bureau. And among itsan charges was to make sure we never had any more Bank Failures. And i am just wondering did you have any contact with the cfpb mr. Becker . It was one of our regulators. Given we are predominantly a commercial bank the interaction was not as significant as the other regulators. Is less significant than the other regulation here that correct . And the Federal Reserve the state and fda seat. Mr. Shay same question progress in my role as chairman i dont recall ever meeting anyone from the cfpb. Okay. Mr. Roffler same question progress i dont live ive met with the look from the cfpb but they did periodics exams and visits to First Republic. Okay. You think this cfpb could have been more helpful in helping you avoid . I think this cfpb along with our regulators we interacted with we had a very professional and open relationship. Shared with the bank and set up to what the results were. They did thoroughat examinations and respond to feedback. Mr. Becker refute sell, convert or otherwise affect any of your stock in the 12 months precedingou . Theres no stock that was sold in 2022. Into the mic i cannot hear you. There was no stock i did not sell any stock in 2022. And in 23 i sold after our Earnings Release after it was reviewed by our legal team and myself i did not have inside information. I put a in place in january that was sold as expiring Stock Options from 2016 pickwick so much was that the value of the five of that . The gross amount was 3. 6 million. Okay. Mr. Shay same question. I sold no shares in 2022 with the exception of reversing three shares that were accidentally bought in my account which were then sold back those with three shares. And indeed i purchased shares throughouty that. 2023 . 2023 a purchase the shares tenth, 2023. Mr. Roffler pickwick site transacted twice once in 2022 and 1 cent early 2023 but both of those transactions were made with the approval of her policy and procedure in a general counsel. They were also made following disclosure of Financial Information to the market one through our investor day into through our Earnings Release. The last thing i would say is it represented a portion of my shares in the vast majority are retained for. Were the days in the amounts of those transactions . On the dates was about november 15 or 16th. It was just over a million dollars. The other date was around january 19 or 20th. Roughly the same amount. To see my time is about to expire mr. German i yield back because a gentleman yields. Judgment from california mr. Sherman is now recognized. Thank you. One thing i have commented on is the idea the Federal Reserve regional boards are not selected through democracy and the voters of this country. But governmental powers given to those who are elected by banks. And they elected greg becker. Not sure its a good system but 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 they are cheerful presentations of the ceosic of their dedication to their 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 diff and corporate malfeasance but their own strategy of blameca biden. What they have suggested is that we should not have thought inflation. Americans should be payingg higher prices so the three worst run banks would survive. Talk about the tail wagging the dog. Society 100 year flood. I saw a 16 Interest Rates under the reagan administration. The reagan administration. This was a modest rainstorm and three of you went down. 99. 5 of the banks survived this modest storm. The reason these banks went down is because her recklessness and greed. The bigger the risk, the bigger the bonus. 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 their money at a solvent banks. This is not just a b liquidity. Roblem the strongest bankers in this country looked at Silicon Valley bank and determined that it was worth negative 20 billion with the nedin net worth some beer money out of that bank. So, Silicon Valley bank virtually doubled the duration increase the yield of the securities that it held. That led to bigger risk, higher profits, and more money and mr. Akers about this for the fiscal year. Then, Silicon Valley bank at the end of 2021 had 56 of its available for sale portfolio hedged their credit default swaps. In other words they had insurance on this 56 . They saved up money, cut the insurance down to ensuring only 2 of the portfolio, lower cost, higher profits, bigger bonus. So it is not surprising these are the banks that went down. Mr. Becker eisai take responsibility for the collapse of your bank. Are you willing to return the bonus you got the day before the bank failed that youd then took on your hawaiian vacation . Congressman, as i said earlier plan to cooperatee progress we do it voluntarily or only if the Government Forces you to . T congressman i will cooperate. That means only if the Government Forces you too. We have voluntarily returned that portion of the bone bonus directly attributable to the banks higher income for 2022 because youl want to longerterm higher yield securities . Congressman i will cooperate. If its only enforced frequency return that portion of thebonus attributable to money you saved by throwing away your Flood Insurance as it began to rain or cashing it in. And not having hedges and credit default swaps on your port for that would you return that part of the bonus question. Again not with the process progress mr. Becker you testified before congress in 2015 that having tough regulation would divert significant resources of the bank to complying with enhanced prudential 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 inia writing. The gentlest time is expired by the judgment from missouri the chairman of the National Security subcommittee is now recognized. Thank you, mr. Chairman. I welcome the guests thisg morning. Gentleman as tragic as a situation is its also a learning moment for all of us. Its a moment for all of us in congress and the regulators and bankers around the country quite frankly. This standpoint we are in a new world in regard to social media and the actions that can be taken and the actions that can have adverse effects on our financial system, our culture, our economy. Im very concerned about it for each of you and your testimony it mentioned, mr. Becker 42 billion without your bank in 10 hours. Mr. Shay 16 billy went out a few hours and i miss the number on yours. But again you have the same situation for social media excited people to the point they ran out, change their banking situation. As a result a lot of the uninsured deposits in your bank ranf out. I would like for you to give me your analysis on this. Is it at the eye see tracking this with you as this was happening so that they were aware of this are really notifying them at all is this money is going, mr. Becker . Congressman, we notified the regulators bridging the capitol race. They were aware of un that. The bank run started on march 9 i wasng not directly involved i cannot say the exact discussions that were happening. But to my memory, my knowledge of our risk team and Regulatory Affairs team were engaged in conversations with the regulators. En mr. Shay . As chairman i do not know precisely the conversations that were taking place between treasury for. There was contact is the question. Excuse me . A clue that was there contact between burbank and the regulators with the amount of money flowing out . I would defer to management. Mr. Roffler. Thank you the question but cemented my testimony at opening working relationship with the regulators. That included as the contagion spread on march 10, we had the multiple meetings in the morning all in the evening that day reviewing our funding and our liquidity happening at the bank. Collect all view having gone through this, what do you think is a realistic situation we need to be considering here . I sit on the china select committee. This scares the dickens out of me quite frankly. Im sure chinas watchers plate 20 business with their own bags in her own economy. Having gone through this this is a very real concern . Am i overreacting to this . Nuts next and it was, but social media have the kind of effect on this that could directly impact crusher system, what you think mr. Becker . I think were evidence of that. I think its something that is to beat looked into to determine how to best protect against it. Mr. Shay . Thinking back to that friday, those a few hours and i remember talking to depositors who were so panicked. I started my career i was at wall street during 1987. The panic that was flooding through social media. People were singly did not want to hear about solvency that the bank was solvent they do not hear about 29 billion of liquidity they did not want to hearyi about rating agencies, rating safety dont hear about anything they just wanted to hear and when he gets their money to it too big to fail bank and they wanted to do immediately. Mr. Roffler. Yes is very challenging the panic was very really spoke to the clients to at the end of every conversation that they decided they wanted to do something differently facilitated that and help them. Itev definitely started with the contagion thatth spread to us. Is really concerns me. Back in 2020 we had a run on toilet paper of all things. People prioritize their money over toilet paper. We already had three examples here and i think the regulators took someth actions to minimize the contagion effect across the system whether it was enough or not im not sure but something when you certainly look at and study. Vice chairman boris here yesterday. The comment that cover response of us interestrate risk and political risk. Mr. Becker were examiners looking into equity risk in your bank . Congressman Liquidity Risk i know for a certainty that was discussed. As i mentioned earlier to answer the question i do not have direct experience when hearing about Interest Rate risk. Am confident it happened. Osama simons expired the gentleman from georgia mr. Scott is recognized. Mr. Becker. What percentage of your deposits at Silicon Valley exceeded the fdics insurance cap just before the bank collapsed on march 10 of this year . Congressman, as i mentioned in my testimony had been sbb for 30 years to my recollection we have always had a high level of uninsured deposits. It was not that different at the end. Am sure ther i whole nation, the whole world notes you had a high percentage. But in fact, according to the S P Global Market Intelligence data from december 2022 we nows 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. You not to answer that is absolutely unbelievable. While the average u. S. Banks was 30 , you had 95 . Almost all of your accounts uninsured according to the S P Global Market Intelligence. Not only exceeding the fdic insurance cap, but doing so with his 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 being absolutely 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 susceptible to panic. So, let me ask you this mr. Becker. At any point leading up to marcf regulators concerns regarding your banks overreliance on a 5 of your bank account being uninsured is it . And, to my earlier point given we are a commercial bank we have always had a high level of uninsured deposits. A high level you keep saying a high level. All of them. I cannot even imagine your thinking. And you are thinking the americanot people are not highly disappointed in your total disregard of their money. And you not having it insured. Less than 5 insured. Now 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 or responsible and deceitful decision . Who made it . Congressman, as i set that has been our Business Model. Who made the decision my friend . Was itde you . Dont simons expired he can submit an answer in writing for the record. The gentlewoman from missouri mrs. Wagoner, the chair of the subcommittee on capitol markets is now recognized me. Thank you mr. German voted thinker witnesses for appearing before the committee today. The reckless actions by you and your management with the paychecks of millions of americans and thousands of businesses. Some of which were in my district in missouri second Congressional District at great risk. I had businesses that provide good jobs and might district left wondering if they would be able to even make payroll the following week. Now, yesterday we discussed supervisory failures abject failuresey of the prudential regulators. Its now abundantly clear that should have taken strongerr enforcement action after many, many citations to prevent these collapse from happening. Today i would to hear from you all as to why your banks were insufficient in addressing a rising Interest Rate environment that started over 12 months ago. Mr. Becker . As Interest Rates increase at the most rapid pace in modern history because Monetary Policy had to battle runaway inflation. Didor supervisors at the fed shw extra attention to Interest Rate risk issues . If they did when did they begin attention . T congresswoman as i mentioned earlier we look at the supervisory findings we had one mra regarding Interest Rate risk. It was mainly related to modeling. Again to my memory i do not recall that coming up as a major topic. What was the discussion that had been had with the main what was around liquidity. And we to my knowledge addressed all or the majority of those findings during 2022. Mr. Becker, i march 8, 2023 with sbb announced it was selling the available for sale portion of its securities portfolio the fed had already implemented nine Interest Rate hikes. Why did sbb attend to sell these sooner . Congressman the decisions around when to sell the securities and what to dos and monitored and managed by Asset Liability Committee and Treasury Team and overseen by a finance committee of the board. The first time i recall coming up about the possibility of selling are available for sale portfolio was in the fall the end of 22. It was decided that, at that point it didnt make the most sense for it was a belief the rapid rise of Interest Rates could create and likely would create a recessionary environment and rates with start of the other way. In the beginning of 2022 or 23 we realized that was unlikely to happen. We decided to then sell the portfolio. Mr. Becker the fed reports notes prior to 2020 Silicon Valley bank 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. Can you explain white made the decision to drop these hedges . Two points and i get to the answer to your question. He hedges that were in place again set up by Asset Liability Committee and are Treasury Teamwork only on a portion of our available for sale portfolio. Which was a much, much smaller portion of the securities portfolio do not call the specific percentage is 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 Asset Liability Committee. Parks to be more beneficial to your Balance Sheet to cap those hedges as long as additional Interest Rate hikes were on the horizon . The fed was clearly going to keep raising Interest Rates. Congresswoman i do not know the exact rationale behind it. I do not have that information. Such report mismanagement. So reckless. Soac many paychecks to million were on the line many of which my own district i am just disgusted. Following up and i would like you to answer this in writing, we were talking about your engagement with fdics potential acquirers. He said they did not engage you. I want to know if you were surprised at the i see did not take you up on that offer and if you kneel could you send that to me in writing thank you i yield back. A gentle lady yields back the gentleman from massachusetts mrt thank you, mr. Chairman for no one to on t the gentle ladies line ofba questioning mr. Chairman, i would like unanimous consent to enter into the record an article from the New York Times dated december 15, 2021. Without objection. This article basically says that the fed had made clear parenthesis december of 2021. And it says a fresh set of Economic Projections released on wednesday showed officials expect to raise Interest Rates which are now set to zero three times the followup care. This is december. Mrs. December of 2021. The fed went ahead and raised rates seven times in the following year but said they were going to recent three times. You were still lit up with longterm lowinterest securities that were uninsured. So you are basically mccue failed to anticipate the impact that a rising rate environment would have on those deposits . Congressman as i mentioned in written testimony and this is very important to our balance is constructed or asset side with securities and also loans. Those loans are variable rates meaning as rates rise we make more money. So my view is yet to look at the entire report should 97 of your deposits were uninsured. 97 . Those are the first deposits to run. These are the canyons ofu Bank Deposits they run the fastest and they run first. And you failed to appreciate what would happen when rates went up. But the fed told you. The fed made public their intent and december of 2020 when they were going to raise rates. Is this the. You did not have a chief risk officer is this correct . No it is not. Is not. What did your risk officer advise you with that point . Congressman i do not recall specifically what the discussion was around them. I know againer my memory. Outlook. It should not take the risk officer to figure this out. Let see you at 91 billion of assets locked into longterm lowinterest securities. 91 billion. And as rates went up in 2021 excuse me 2022 the value of those assets plummeted went from 91 billion to 21 billion. And everybody headed for the door. How could you not anticipate thatat . How could you not understand the impact of a rising rate environment on your deposit base . I do not get this. I find itu hard to believe that no one at the bank anticipated this. What is your response . Congressman but is the 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 was the alternative scenario . The alternative reality that allows you to keep these . This 91 billion in assets were held to maturity. That really frightens people we had to start selling those at a considerable loss and realizing the losses. The losses of this strategy. Im asking for an explanation of why you did what you did in the face of what was going on . Congressman its a complicated answer. Looking at the Balance Sheet you have to understand the assets again our loans were variable rates they benefited from higher rates. That is part of the equation. Earlier in your testimony or blank the feds. But not telling you is in the Interest Rate issue with you. When a High School Student throughout the danger you are in. Mr. Sherman yelled back. The gentleman from texas, mr. Williams is now recognized for. Thank you, mr. Chairman. Full disclosure i am a car dealer from texas. Mr. Shay and the recent department of internal review regarding the supervision should Signature Bank assured your bank did not develop ahe controlled remark in line with this growth did not have a liquidity Management Plan to match its risk profile. Regulators had identified weaknesses in the banks liquidity Risk Management yet signatures management failed too act on or remedy these warnings. Youe, are in the position you ae and right now because you failed to adequately manager Liquidity Risk and position. My question is when you are 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 . Consisting of readily marketable Government Agency and other securities. In 2022, we saw the federal jot rice in rates caused as sets of Silicon Valley bank to decline in value and we know n this and when recalls svb risd at a a rapid rate and these asss sold at a loss and, mr. Becker, when the bank invested 80 billion in long term back securities was there a plan in place for the assets and bonds and ms. Wagner touched a bit on that. Congressman, novicements were invested in securitiess and if you needily kidty, invest death sentence if you need liquidity, invest in those and 12 billion a year of those securities would amertize down and we had availability with the sales portfolio and then cash. When we looked at it, we believe we had adequate liquidity to support several different scenarios and the bank didnt have a chief risk officer between april 2022 and january 2023 and this seems your team did not care about risk and there were several warning signs it hadad been bright to light, u your team didnt think to mitigatet the resident and can brought on chief risk officer in january and then proved to be too little too late and mr. Becker, quickly during the time the Silicon Valley bank didnt have a chief valley officer and who have been overseeing to hire and define a candidate. Congressman, i disagree we county take riskmanment seriously. There was no one in charge but thats fine. There was a team of Senior Executive people in leadership positions and. Created office of cro and reported to me and chair of the Risk Committee and we were actively engaged in Risk Managementnt broadly across the organization in being row responsive to the regulatory feedback. Like in my car business having ability to sales cars and not having a sales manager. I yield. The gentlewoman from ohio has five minutes. Thank you. I want to n take a moment to acknowledge the hard working americans that were mentioned at your banks and nay were nationwide and Silicon Valley bank bankin and signature. In my otay mesa town in my third Congressional District, the home of ohio state teacher retirement system took the biggest hit and over 27 million invested in your bank. Meanwhile with the reports that have come to light since the banks collapse in march, we know that executives at your bank earn millions in bonuses, stock sales, increased executive compensation while you ran the banks into the ground. I dont need to go through it and hurt it on the side. Meanwhile teachers like my sisters, Fire Fighters andt otr Public Servants lost millions ma were invested in the public mention fund and mr. Scott ran out of time and any one of you can answer his questions and who made the decision to continue with these uninsured deposits and give me a look. Its just at work. Do you thank you again and thank you earlier for acknowledging and the responsibility. Were going and not having anything to serve mid size banks. Who implemented it and who made it possible. Same questions. Board of executive and manage of the executive for 30 years. Thats because of the caucus and whats the next thing. Ive heard youve been there and 30 years, 12 years the ceo a lot of times and founded 2,000, cofounder of Signature Bank and ceo since 2009 to present. How much money did you make . What was your salary for 2022 and 2023 and bonus. Salary and how much in bonuses, dollars and cents. For 2022 . Yeah. Salary was just over 1 million and my incentive compensation was 1. 5 million. Okay, next. My salary, my last salary was 900,000 and 1. 7 million bonus. My last salary was 990,000 and my bonus 1. 5 million. Okay. Do you know let me start with you, mr. Becker, you know what mra stands for in mria accident right . I do. Okay. Same for everybody. You understand the whole thing. Okay. So mr. Becker, the recent report says mrn a m rina and 30 pertaining to casual planning and liquidity and Risk Management and governance and control and are these strategies youre talking about and antiMoney Laundering. 12 of the 31 open issues on the mria so those watching that dont know is immediate and can you explain after three years why we still had animals with only 12. Congresswoman, we were extremely responsive to get them back and all the matters youre describing my time was running out. Do you know what they were . I cant speak to every single one but i know that my time is expired. The sent l ladys sergeant l ladys time sex pyres. Gentleman loudermilk. This is a very important issue as you all are aware. Mr. Becker, chairman andy barr ask you about the departure of the risk officer from Silicon Valley bank and yesterdays hearing before the senate bank banking committee, you said this was spurred in part by recommendations from regulators that were concerned about her experience. Can you tell u more about the specific concerns that fed regulators had about cros experience. Yeah, congressman, i described yesterday and the feedback was observations from the board of directors from the regulators, from myself and internal audit and as we started to approach 250 billion leveled looking at individuals especially in the risk area and larger institutionss was the feedback we were getting and so thats what we acted on. According to her public linked in profile, she had over a decade of experience in intersurprise and management in her sixpr years of employment in developing the bond portfolio and the labs. The Asset Liability Committee and she would have been a Voting Member on theut committee and given i wasnt on that committee and wasnt part off it, i dont know the discussion that she would have had in overseeing the overall port fuel owe around it. Takes time to find good executives but why did you decide to dismiss her without a successor in place . As i mentioned earlier based on the feedback, we thought it was best and consulted with the regulators including the board was driving as a chief risk officer reported into the committee and decide thatho havg our chief risk officer on board as a consultant thats available made the most sense as we build out our office of the chief risk exposers had those Senior Leaders and management reporting to myself and reporting into the chair of our Risk Committee. You felt that was better than keeping her in in an interim position . We did. Its reported that the Risk Committee met 18 times in 2022 more than double the number of meetings in 2021. At any point during the meetis was the interestsv rate risk on cosvb Balance Sheet discussed . Congressman, the 18 meetings were a variety of different topics and it was around governance and controls and looking at the metrics around our its called a Risk Appetite statement and its what level of risk are you willing to accept as a institution and the Liquidity Risk would have been the main area where that was stressed and that was discussed. Do you remember when the first time the Interest Rate risk was brought up . Again, my recollection was liquidityni risk was one of the metrics reviewed and so that would have been discussed across many of the Risk Committees going back for a long period of time. E would you say that was a some pee lining number of meetings in 2022 than in 2021 . I wouldnt say that was the main reason or compelling reason. It was really overall enhancing our Risk Management across the entire platform including governance. We changed the structure about a year earlier and making sure we had the right risk governance across the entire platform. Also want to clear up confusion regarding the office of chief risk officer committee and the Risk Committee and were these two the same and if not were they substantially similar in composition and function . They did not include Board Members and the Risk Committee was a board level committee. Okay. Im quickly running out of time and wont have time for additional question and ill submit them for the record and, mr. Chairman, i yield back. Thank you. The gentleman from california, mr. Vargas, hes recognized. Thank you, mr. Chairman, i want to thank you again and the Ranking Member for putting together and i appreciate it. I dont like being in the position were in today. Face yuri colins. Im a re failure. Im a religious liberal and when someone is pour and does something wrong, i believe in redemption for them and when theyre rich and fails, i believe in redeposition for them and redemption for them and im not going stand and beat them up. Im disappointed as all of us are and hope that you cooperate with the government so we can fix some of the problems and one of the problems that i see is that it seems like the banks all of your banks were reactive and notot proactive in the situation. Youre calling it unprecedented circumstances and events and i never will. Its unforeseeable and unprecedented. Those on the other side of the aisle think of deregulating in situations like this and most on the aisle think about regulation and not doen regulations. What can we do in the situation. Another time the social media or short sellers manipulate the stock and can do that quickly through social media and all the sudden we can do that. What can the government do to prevent this so people dont loseth their money . Would like to why dont you take a shot first. Mr. Rothler. Sure. Congressman, its a very good question and reflected in the last 60 days that i thought about frequently andnd sitting here today its very hard to give any good advice as we learned through march 9, we were in a strong position. 2023 was goings to be a bit moe challenging than 2022 from an earnings standpoint but when contagion hit after the failures of the two other banks and my recommendations to others would be any trigger for example, panicb hits at wall street too and we put in triggers and put in things that slow the system down. Is there anything that we could do for that . I think the Banking System is sound. Its resilient and sound. Theres always the opportunity for panic and theres always opportunity to make money and manic. Not everyone lost money in the deal. Shortt sellers made money and we need to investigate them to find out what happened and is there something to do and something we can don on the bank. On march s they adopted one of the march 12, they adopted one of the lending programs which banks could utilize and i think banks did utilize that successfully and on deposits on fdic and the proposal and thats worth looking at and that can calm the waters. That same question. Thank you, sir. I cant give you a solution. But i can tell you what i believe is a problem that needs to be fixed. Whats that good news. The customers didnt to want hear anything i spoke to. They just wanted to get to i need to get my money to Jp Morgan Chase and the government wont let them go and need to get my money to citi bank and make sure theyll save them a second time. It was panicked calls and i need to get them to a too big to fail bank because they might let you go. Im not a bank analyst and dont know banking but just run ago Plumbing Supply area and running a school bus operating business. Faim running a Healthcare Provider service. I have deposits well in excess of the insured and its really very my time is up but i appreciate your answer. We need to take a look at that because i think when the pap ick sets in, theres no way to panic sets in, theres no way to stop it. The gentleman yields back the the gentleman from tennessee is recognized. Thank you to the witnesses for being here and not an easy environment and i want to back up three years or so and think about the decisions youre making in your banks and lets imagine that you could have seen forward and crystal balls were working particularly well. If youin had known that in 2022, inflation would each a 40year high, would you have managed the bank differently going into that period . Congressman, i think about your question a lot in hindsight and thats information we didno have access to. We only had information availabletous at the time. Lets imagine if you had known that and could have anticipated attendance to that. My guess is youd have made different choices, is that true . If we knew and and the team would have known, thats the fastest rise. If you could have forseen the fastest rate rise in history, youd have managed your Balance Sheet differently. Thats likely wed have managed our Balance Sheet differently. Mr. Shea, same two question ifs you see the inflation rate and attendance rise in Interest Rates and made different decisions. After that and meant all regulatory definition sos the Signature Bank portfolio available for sale was of a controlled Interest Rate it was an issue but noted one that caused the bank to not be well capitalized under well regulatory standards. Thank you for the question. Ive thought about it a lot. Frankly the 37 years in the banks history, our goal each and every day woke up and the shrines and entirely unforeseeable and contagion interacts and hard to control and our Business Model profitable and strong and all capitalize and everything changed on march 10. If the fed opened the discount window allowing you to borrow against your bond portfolio at par before this all happened and ill direct to you, mr. Berk, would that have changed would we be in a different place if that facility it existed in february and following . Congressman, i dont know the answer to that question. It would have been hard because on thursday 32 billion and on friday 100 billion requested to be exodus svb and i dont know if that would have helped or noe bank run. Im wondering, mr. Becker, you all, your bank had an extremely cob sen trade level of risk of deposits and what led you to believe theyd be sticky if waters got choppy. Our goal at end of the day is to serve them in a way where that loyalty would be created by being the best place for them to operate, which i believe is exactly what we delivered on. Thats what we believe to happen and what history taught us and we believe that to be the case. Azure bank grew down deposits another a face pace and better not take more deposits from the customers. If you will, ill answer for the record. Real quick answer. The majority of the cash that came in that i talked about with the growth came from existing clients. We felt that was the rights thing to co. Rest for the record. Thank you. The time is expired and youre recognized. Thank you all. Mr. Becker, lots of my colleagues talked about the fact your chief risk officer was terminated in april 2022 and your testimony mentions that was under some confective pressure from regulators. You didnt disclose you were operating without a risk officer till your proxy statement at beginning of 2023. Were regulators aware of that decision to go through 11 months of shareholder s . Jot regulators were aware of the decisions around the chief risk officer. I dont know if they were aware of any disclosures. It was your opinion that was not a materially significant fact to disclose for is 11 months . Congressman, that decision around disclosures is around the process youre the coo. Okay. During that 8, 9 month period, you doubled your number of risk meeting ands did regulators participate in the meetings . During the day you announced a 1. 8 billion loss on the sale and also to go. When did you initiate the process of selling equity and ends up with goldman that commenced on march 8. Issues to raise goldman and initiating the process of goldman on equity and debt transactions that happened on march 8. We started the discussions of the last of february and whether youd mention Liquidity Risk and more risk and thats in response to those concerns and when were those concerns raised that would have been. My recollection towards the end of february and my cfo and i were having a conversation and look at last roughly two weeks to three weeks and 10year treasury jumped significantly and. Im not looking for the why but the calendar of who knew what when. Sold march 8 and started in february and when were there corns raised to start this process . Was that the day before . January state to maximize . Congressman, there werent concerns raise that forced us to do that. We decided to do it and talked at the end of february and engaged our board and regulators and we talked about it. I want to get to thornhill tore that so you sold 3. 6 million to stock personally on february 27 which would have been right about that time. Initiated january 26 all this was going on and did your Risk Committee sign off on that sale . This has been the process as long as ive been at the bank is that when you want to sell stock, you put together a plan. Its reviewed by our legal team. Given my question, that was the Risk Committee and did they sign off or that they were notified in i dont know. I dont think the Risk Committee would have been notified and it was the legalco team that concurred with my maternal prevention. Youve mentioned several times you dont recall any discussion around Interest Rate risk prior to 2023. Do you recall concerns that you were overinsured against Interest Rate volatility . Gee can you clarify the question . Exposure to this resident and can sold down 97 of your Interest Rate header on the portfolio was there a raise that had you were overinsured on the risk because there was a decision made to essentially take on long term risk in exchange for short term transfer to equity. As previous limpingsed as far as decisions around the he hethinks and it was venezuela against the sales portfolio and went with 5. 63 million insured. Witness can answer the rest of the response for the record in writing and well take a brief five minute recess for a quick break and i ask that they return promptly and well return in just a little after the top of the hour. The committee stands in recess