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Former leaders of failed banks appear before a Senate committee

ARI SHAPIRO, HOST:

First, we turn to Capitol Hill.

AILSA CHANG, HOST:

That's right. That's where the leaders of Silicon Valley Bank and Signature Bank testified today. And they got a chilly reception, to say the least. You see; about two months ago, both banks failed. That shocked markets and sparked turmoil that still has not let up. NPR's David Gura has been watching the hearing and joins us now. Hey, David.

DAVID GURA, BYLINE: Hey, Ailsa.

CHANG: So what were the big revelations in today's hearing?

GURA: Well, many senators are eager to channel anger about what's happened here into action, get these executives to return some of the tens of millions of dollars they made - that senators highlighted the fact that these two failures cost more than $16 billion, money other banks will have to pay back. Some senators suggested the government should claw back some of that compensation. Democratic Senator Elizabeth Warren of Massachusetts asked Greg Becker, who used to run Silicon Valley Bank, if he would give some of that money back.

(SOUNDBITE OF ARCHIVED RECORDING)

ELIZABETH WARREN: How much of the 40 million are you planning to return? How many times are we going to do this dance?

GREG BECKER: Senator, I promise to cooperate with the regulators as they do...

WARREN: Are you planning to return a single nickel to what you cost the fund?

BECKER: Senator, I know there's going to be a process review of compensation. And I'll...

WARREN: I'll take that as a no.

GURA: Also, Senator Warren noted she and other senators on both sides of the aisle have introduced legislation that would make it possible for the government to claw back executive compensation. You know, Michael Barr, the Federal Reserve's vice chair for supervision, also brought up clawbacks at another hearing that took place on Capitol Hill today, this one with top banking regulators. He told the House Financial Services Committee the bonuses executives collected were, quote, "outrageous." And he said the Fed is investigating them.

CHANG: OK. So the gist, it sounds like, is there was not a lot of love for these executives from these senators.

GURA: No, no.

(LAUGHTER)

GURA: No love. And a lot of outrage that regulators had to step in to rescue depositors at these two lenders. You now, many lawmakers said these bankers were not serious about the risks they faced. And at one point, to illustrate that, Republican Senator John Kennedy of Louisiana played a clip from this bizarre video that Signature Bank executives made for staff, kind of a strange Broadway-style sendup of how Signature Bank was founded.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MUSICAL GROUP: (Singing) What possible fate will become of our bank other than to diminish and fail?

SCOTT SHAY: I happen to know for a fact that won't happen.

CHANG: (Laughter) What?

GURA: Of course, it did happen.

CHANG: Yeah.

GURA: And the voice at the end there saying Signature Bank would not fail was one of today's witnesses, the bank's former chairman. Like many of his colleagues on the committee, Kennedy's primary target was Greg Becker, the former CEO of Silicon Valley Bank, the first one that failed. Kennedy accused Becker of mismanaging the bank's investments, especially investments in government bonds, which left the bank exposed to a bank run.

(SOUNDBITE OF ARCHIVED RECORDING)

BECKER: Senator, there were a series of events, unprecedented events that occurred that led us to where we are today.

JOHN KENNEDY: No, this wasn't unprecedented. This was bone-deep, down to the marrow stupid.

GURA: Becker said he was sorry about what happened, Ailsa, but he and the two former executives from Signature Bank did not take responsibility. Instead, they blamed the unprecedented speed at which depositors withdrew their money, which they said would have been a challenge for any bank.

CHANG: OK. So the executives may not be taking responsibility, but I guess at least the regulators are, right? As you said, they were also on the Hill today. How did that go over?

GURA: Yeah, the Fed faulted regulators in this major report. Many Republican lawmakers said they're worried the failures of Silicon Valley Bank and Signature Bank will result in too much regulation. And they accused regulators of being asleep at the wheel. That's something that Republican senators echoed today. They'll get a chance to grill regulators at a Senate Banking Committee hearing on Thursday.

CHANG: All right - to be continued. That is NPR's David Gura. Thank you so much, David.

GURA: Thank you. Transcript provided by NPR, Copyright NPR.

Ailsa Chang is an award-winning journalist who hosts All Things Considered along with Ari Shapiro, Audie Cornish, and Mary Louise Kelly. She landed in public radio after practicing law for a few years.
David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.
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