U.S. Sen. Elizabeth Warren (D-MA) is seeking answers from former Silicon Valley Bank CEO Greg Becker on potential efforts to roll back Dodd-Frank rules prior to the collapse of the bank.
Warren said that five years ago, in the Trump administration, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which rolled back banking regulations enacted by the Dodd-Frank Act. One of the provisions was that it raised the asset threshold at which a bank is considered and regulated as a “systemically important financial institution” (SIFI) to $250 billion. This exempted SVB and other mid-sized banks from regular stress testing and enhanced liquidity, risk management, and other requirements.
Warren said these rules had originally been implemented to safeguard the banking system and the economy from negligent risk management policies banks. Warren said negligent policies were a key cause of the failure of SVB.
Further, Warren said Becker and SVB executives were among those that lobbied to roll back these Dodd-Frank protections. She cited a 2015 statement submitted to the Senate Committee on Banking, Housing, and Urban Affairs where Becker said SVB does not present systemic risks and that the bank had conducted its own range of stress tests.
“Despite your assurances to Congress that SVB was sufficiently protected from risk because of your various efforts, it is now clear that SVB was wholly unequipped to independently assess its business’s risk,” Warren wrote in a letter to Becker. “SVB failed – while its Chief Risk Officer position sat vacant for eight months as its financial standing deteriorated – because it failed to address two key risks: concentration in your client base and rising interest rates.”
Warren also drew attention to Becker’s $3.6 million sale of company stock just days before SVB’s collapse, as well as bonuses paid to SVB employees just before the Federal Deposit Insurance Corporation (FDIC) shut the bank’s doors.
“You lobbied for weaker rules, got what you wanted, and used this opportunity to greedily and incompetently abdicate your basic responsibilities to your clients and the public – facilitating a near-economic disaster,” Warren wrote. “There is much work to be done to understand the failure of SVB – and these efforts must start with understanding your role in the rollback of banking regulations that facilitated this failure.”
The senator posed eight questions to Becker in the letter and asked for responses to them by March 28.