When asked at a Senate hearing this week who was responsible for the Silicon Valley bank’s demise, the lender’s former CEO, Greg Baker, had plenty of ideas, blaming regulators, the bank’s board and its clients for bringing it down.
On Thursday, senior officials from two of the bank’s main regulators, the Federal Reserve and the Federal Deposit Insurance Corporation, told members of the same Senate committee that some of the impressions Baker left on lawmakers were wrong.
Contradictory testimony before Congress threatened to pose another problem for Mr. Baker, who faces an investigation by federal criminal prosecutors into his dealings with the failed California lender as well as a shareholder lawsuit accusing him and another top leader of misleading investors about the bank. health in the period preceding its failure.
James N. Cramer, Mr. Baker’s attorney, said Mr. Baker stood by statements he made.
The regulators’ comments were part of a hearing by the Senate Banking Committee on what banking supervision should look like in the future in light of the failures of three regional banks this spring. It came two days after Mr. Baker appeared alongside former top leaders of Signature Bank, a New York lender that collapsed just after Silicon Valley did and prompted the federal government to take drastic steps to prevent a widespread panic in the banking system.
Senators on Thursday asked regulators responsible for overseeing Silicon Valley’s bank about two exchanges Mr. Baker had with committee members earlier in the week. In one, Mr. Baker appeared to claim that his bank had fixed all but one of its problems before it failed. On the flip side, he seemed to say he was being shut out of the process of finding a buyer for the Silicon Valley bank after it failed.
During the first exchange on Tuesday, North Carolina Republican Sen. Tom Tellis asked Mr. Baker to describe how his bank had responded to problems regulators had pointed out in its risk-management practices. Mr. Telles brought up a list of regulators he referred to as “matters requiring attention” and asked Mr. Baker to describe how to deal with them.
“We’ve been working hard on it,” Mr. Baker said. “To my memory, by the middle of ’22 the vast majority of those hits had already been rectified. And I think even in early ’23 I remembered there was almost one of those hits that was great, so the team again in my view was very responsive with feedback. organizational.”
On Thursday, Sen. Mike Rounds, R-North Dakota, asked Fed Vice Chairman for Supervision Michael Barr if the problems had already been fixed. Mr. Barr said they did not.
“Mr. Baker told this committee that they took care of all the problems,” Sen. John Tester, a Montana Democrat, said in an interview with Mr. Barr.
To this Mr. Kramer replied: “A. Becker was referring to the feedback he had received from the internal team at SVB” and never intended to suggest that the organizers had agreed to wind things up.
Also at issue was whether Mr. Baker had been able to help find a buyer for his failing bank. In his written testimony before the committee, Mr. Baker said he “did every effort to ensure that SVB’s clients and employees were protected, and worked to minimize or eliminate any losses that might result from the FDIC takeover of SVB.”
“This included seeking to engage potential acquirers, which I believe might have reduced the financial burden of the FDIC acquisition and would have protected SVB employees,” he said.
On Tuesday, Sen. Bill Haggerty, Republican of Tennessee, asked Mr. Baker if federal authorities had allowed him to help find a buyer for the failed bank.
“I’ve offered several times to engage potential acquirers,” Mr. Baker told Mr. Hagerty.
“Have they ever consulted with you? You said you offered, but did the FDIC consult with you?” asked Mr. Haggerty.
“They didn’t,” replied Mr. Baker.
On Thursday, Mr. Hagerty asked the organizers if that was true.
“It is my understanding that the FDIC staff did indeed meet with Mr. Baker on Saturday, and I believe it was Saturday to get input from him,” said Martin Gruenberg, FDIC Chairman. from the establishment.”
“Interesting,” replied Mr. Hagerty. “This is contrary to what he said.”
“He stands by his testimony that they did not consult him,” Cramer said.
The hearing came a month after federal regulators released reports that laid out the roots of problems at Silicon Valley Bank and Signature Bank and the admitted regulatory lapses that allowed them to fester. Regulators said both banks were poorly managed and unprepared for the risks associated with higher interest rates, but noted that the Fed and the FDIC were too slow to respond to red flags.
Republicans on the committee pushed regulators for answers and in some cases accused them of blaming the Trump administration’s loosening of banking regulations for causing the recent unrest.
Sen. John F. Kennedy, R-Louisiana, accused Barr of seeking more power to regulate banks after failing to successfully protect the banking system.
Mr. Barr insisted he was not seeking new powers and, in fact, was committed to doing better.
“I am not seeking any additional power, authority or money from this committee,” Mr. Barr said. “We will use our current authority to strengthen supervision and regulation to reduce the likelihood of this type of event occurring in the future.”
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