Housing, in urban affairs will come to order. The days after the run on Silicon Valley bank, when it was close by the california banking regulators and taken over by the fdic many in washington, new york, in california asked, how did this bank and Signature Bank, soon after, failed so spectacularly . Was it the regulators falling down on the job . Was it new technology . The first social media fueled bank ran . How on earth could this happen . In ohio, the, no one is surprised by the hubris of coastal Bank Executives. The old adage has become cliche because it is so often true. The simplest explanation is best. It is first and foremost the bankers fault that the banks crashed. We know that federal and state banking officials repeatedly told managers and directors of your banks where there were problems, big problems the kind of problems you cant ignore. The tiny you have to start fixing right away. Bank executives did not listen. That is a well documented fact Silicon Valley banking signature got too big too fast. You never slowed down to make sure you are doing basic Bank Management. From 2019 through 2021 so it connally bank more than tripled in size. Signature bank more than doubled in size. Always, always, insert a bigger profits good bankers know that banks cannot safely grow that fast. The Federal Reserve, fdic, and state regulators identified the Aggressive Growth at the banks and the risk years before the failures. Lets be clear, these dangers were not hard to spot. The Liquidity Risks, the unstable nature of uninsured deposits, the concentration of customer deposits. All were giant risks sitting there in broad daylight on your banks balance sheets. Uninsured posits at both banks reached over 90 of the deposits. That is about double the amount of ohio banks, like huntington fifth, or key banks. About banks the size of yours. Former Community Banks like mechanics in my hometown of mansfield. The uninsured deposits as a risk at svb as far back as 2018. The bank never fixed it. It looks like you never even tried. In 2021 in 2022, the fed identified weaknesses in svbs contingency funding plan, defects and its Interest Rate models, weak Risk Management, inadequate board oversight or management. This is banking oneonone. Every Bank Executive, probably every sophomore business major knows that these are fundamental that you must get right. The fdic saw similar signature on satisfactory Risk Management practices as a cause of its collapse. Again, those problems date back to 2018 and 2019. We know executives knew the fdic thought it was a problem because Bank Management would tell the fdic that they fixed some of the problems. In reality, you never did. In the end signatures inability to accurately track or monitor its own liquidity wowed faced a devastating bank run left the new york banking authorities with no other choice but to close your banks. We know your banks were fatally mismanaged. The next obvious question is, why . Why did you let things get this bad. Why did you ignore admonitions from regulators . From that question to there is a simple answer. The simple answer, in the same as we find for most questions about big Bank Failures. Because the executives were getting risk. The former ceo citigroup said, when the music stops in terms of liquidity, things will be complicated. As long as the music of playing, you have got to get up and dance. Well, we are still dancing. The wall street Business Model corporations fall over and over. Executives push short term profits above everything else. How do we know . Management said as much to wall street. Silicon valley Bank Executive bonuses were tied to the banks return on equity. So they bought securities with higher yields to chase higher and higher and higher profits. When the warning light started to flash, and those investments started to lose money, your bank did not change course. Instead, you double down. That signature Bank Executives had incentive competition plans that were tied to return on assets. Quote, to reflect additional focus on profitability. Reflect additional focus on profitability. Focusing on profitability you did to the exclusion of, pretty much, everything else. When it became obvious that your banks were on the verge of failure, you another executives trying to cash out. Svb executives, including mr. Becker in front of us today, dont millions of dollars of Company Stock in the days leading up to the crash. Millions of dollars in company crash leading up to the crash you are paying out bonuses until, literally, hours before regulators seized your assets. To people in ohio, and around the country, this feels sickeningly familiar. To most americans a lack of wall street accountability tracks with their entire experience with our economy. Workers face consequences, executives right off into the sunset. Only in corporate boardrooms can you run your business into the ground, take the whole economy along with, you and come out ahead. We cannot let that happen again. Both of your banks, prior to its fast growth, but not Risk Management, both of your banks pushed up your stock prices in your own executive computation but did not address the glaring risks from, im, sorry from customer and and the concentration. You put other peoples money, and our broader economy, at risk. There must be accountability for that level of mismanagement. Running a bank, as you know, or should, no running a bank is not like running any other company. If you manage your car parts business, or a Steel Company as i spoke to some steel executives, irritant into the ground than you and your employees use their jobs. The surrounding community may get hurt. Theyre usually are not broader consequences for the savings accounts of families on across the country. With your jobs, other peoples money that stake. That is why we recognize that banking is different. Why banks are subject to stricter rules. Or, they are supposed to be. Our committee is looking at ways to impose real accountability on those most to blame for big Bank Failures. The bankers themselves. That is why we discussed ways to increase accountability at last weeks hearing. That is why weve brought three of you together today to answer for the mistakes that you clearly made at these banks. Learning more about what went wrong what helped us craft the strongest possible rules to prevent more these failures. We, know of, course theres blame to go around. Your risktaking was aided by former Federal Reserve vice chair for supervision randleman quorum. Who led the regulatory rollback in 2018, 2019, and 2020. It is clear that those rollbacks of Bank Executives taking on more risk. This all comes back to the power of your industry. The rules of big banks, including your, are lobbying to weakening, to the impunity with which executives have been allowed to operate. The largest banks and people around them have been impervious to consequences for far too long. We need to change the, beginning now. Senator scott . Thank you mister durbin. The last few months have shaken the Banking Sector. Not only have we experience for the largest failures in the banking factor, we also found out that our banking regulators were elderly asleep at the wheel. As i said repeatedly, there are three major issues Bank Failures. First, bank mismanagement. Supervisory failure, and rocketing inflation. I am thankful that this committee has been able to come together to conduct oversight that is necessary for us to understand and appreciate the depth of the mismanagement and the challenges that have been presented to the american people. While todays bank focus will be on the management, thursday we will have an opportunity to talk about the supervisory failures. My democratic colleagues will avoid the economic failure that landed is where we are today. When you spend and print trillions of dollars leading to the highest inflation we have seen in my lifetime, ten Interest Rate hikes, this is what happens. Ten Interest Rate hikes in about a year, sends a signal one of what is actually happening in the marketplace. That seems to be completely ignored by the Bank Executives. On top of that, our colleagues on the left have decided to make jared bernstein, the architect of the biden economy in the biden failure. The chairman of the cia. Today it is high time that we figure out what went wrong from a Bank Management perspective. It is critically important that we understand how our Banking System experienced two of the largest failures in its history. That starts with getting answers from yall. I would like to start with mr. Becker. I ran a business for a while. I will tell you, honestly, i am shocked at the complete negligence and disregard for the economic realities that this country was facing. Under your leadership, svb made significant bets on Interest Rates falling when everything indicated exactly the opposite. Im not an economist. I owned insurance agencies. Anyone who paid close attention to the economy over the past two years couldve plainly seen that the Federal Reserve was going to continue to increase Interest Rates. Truth be told, i dont think you need to be an economist, insurance salesman, senator, to understand the direction, the trajectory, of the Interest Rate hikes that we were going to see. There was any jp morgan analysts who said that, svb was already in trouble. I remember a blogger, a financial blogger i think it was november of the previous year, came to the same conclusion that a Portfolio Risk was very high, and increasing. I hoped to hear your analysis on why you did not act on a ballooning risk. How you failed to adapt to the increasingly vulnerable increase inflationary environment. That impacted your bank. More importantly, the customers. The Federal Reserve report noted that youre banks practices did not keep pace with the rapid growth in size, and and risk. Further, the Federal Reserve report also says that the federal directors and Risk Management experience capabilities were lacking for a bank of 200 billion dollars. Not only did you fail to hire a chief risk officer in a timely manner, definition of timely manner is within several months, you went without a chief risk officer in place. That challenge exacerbates the situation that americans came to realize. To me, it sounds like a recipe for disaster. Sadly, in part, that is why we are here today. Even more concerning, the Federal Reserves report stated that, with respect to both liquidity and Interest Rate risks, your Management Team of more focused on chasing profitability that stability. Sounds like greed. Perhaps this is why your institution had 31 open supervisory findings when it failed. About three times the average number. 31 notices that you received. Flashing red lights. Something is desperately wrong. Let me say this. Svb was an anomaly. Your lack of judgment, mr. Becker, shows that you should not have been running the bank. To the american people, our true regional institutions are run by smart, competent individuals. And your money is safe. There is no doubt that the failure of svb fed the bank run leading to be liquidity crisis that ended up creating the contagion that also impacted Signature Bank. Signature banks board of directors and management also pursued rapid, unrestrained, growth. Without developing or maintaining adequate Risk Management practices for the size, complexity, and risk profile of the institution. Nor did the management prioritize good Corporate Governance practices. The fdic report further states that Signature Bank did not always abide by the fdic examiner concerns. Was not always responsive, more timely, in addressing the fdic supervisory comments and recommendations. Mr. Shea, mr. Howell. I will be eager to hear why you thought it was okay to not respond in a timely manner. The laws are not above you. I would like to understand why you thought they were. Like i said before, as charleston restaurant decided to just ignore a safety inspector, i am confident that they will be shut down. That management would be replaced. Americans watching this hearing today should see the examples of that management. Know that while we are demanding answers. Hopefully we will get something that sounds like an answer, this is not the norm. For the vast majority of our Financial Institutions, they are well run. Our Banking System is strong. Your money is safe. I thank the chairman for working with me to get these executives before us. I look forward to hearing their comments. Thank you, Ranking Member scott. Thank you for the cooperation on both sides. The staff on both sides were together for the hearing. I wont introduce todays witnesses. Great becker was the ceo of Silicon Valley bank. President and ceo of Svb Financial Group. The Polling Company for the bank since april, 2011. He first joined Svb Financial Group 30 years ago. He served at the number of executive Senior Management roles. Mr. Becker, welcome. Thank you for being here. Scott j. Was cofounder of saint duran served the chair at the bird since its inception since 1980. Mr. Xi has been involved in the Investment Banking, venture capital, mr. Shea welcome. Eric how was announced as president of Signature Bank february 16th of this year, effective march 1st. Was to succeed depaul after the transition period. Mr. Powell worked as chief operating officer since july, 2021. He was a member of the board of directors and signature since april 22. After senator were shut down, he now served as Senior ExecutiveVice President of flags to our bank. Welcome, mr. Howell. Initially the committee contacted Signature Banks former ceo, joseph paulo, about testifying before the committee. When Committee Staff contacted mr. Depaul owes advisor, he explained a health issue to the Committee Staff. The committee is interested in understanding the management decision the signature, it is important for us to allow mr. Depaul or to deal with his health issues. We agree that with the committee would hear from two of you instead mr. Becker please begin your testimony thank you. Chair brown, Ranking Member scott. Members of the committee. Thank you for the opportunity to appear before you today. My name is greg becker i was the chief executive officer 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 the situation. I was an employee of svb for nearly 30 years. Ceo for the last 12, until it is taken over by the fdic. I believed in the bank, and its mission. I cared deeply about are more than 8000 employees and their families. I was committed to our clients, to helping them succeed. Whether they were a Successful Technology company, or a Small Business founders in towns across the country. Svb was designed to meet the needs of the technology in life science industries. Where startups and later state companies could keep their deposits in order to expand their businesses and create jobs. We knew our client personally. We understood their needs and goals. We partnered with them as they grew. We took Risk Management seriously. We worked closely with, and were responsive to, the various regulators who oversaw svb. Overtime, we built an expanded a team of subject Matter Experts focused on analyzing risks and protecting the bank. We continually sought to add experience and to improve our Risk Management as the banking clients involved. Much has been said about the takeover of svb by the fdic, and why it happened. Ultimately, i believe that svbs failure was brought about by of unprecedented events. Between 2015 and 2019 svb grew from around 45 billion athletes 71 billion in assets at an annual rate of about 10 . This changed in 2020 due to the covid19 pandemic and the government stimulus measures. With nero zero Interest Rates, the largest government sponsored economic stimulus and history, more than five trillion dollars in new deposits floo