Mortgage News May 24, 2023
Executives from two prominent US banks that experienced major failures in March faced questioning from the Senate Banking Committee, shedding light on the causes of their banks’ collapses and potential regulatory oversights.
The hearing not only delved into the failures of these banks but also addressed concerns regarding executive compensation, specifically whether senior executives prioritize short-term gains, such as stock price increases, over the long-term health of their companies.
Despite their banks’ plummeting stock values, executives at Silicon Valley Bank and Signature Bank received substantial compensation, mostly in the form of company stock, before the banks’ downfall. Although the stock is now virtually worthless, the CEOs managed to profit by selling their shares prior to the collapse.
The Democratic chair of the Senate Banking Committee, Senator Sherrod Brown, initiated the hearing by focusing on executive remuneration.
Silicon Valley Bank’s former CEO, Greg Becker, received compensation valued at around $9.9 million in 2022 and sold company stock shortly before the bank’s failure. In the period preceding the collapse of the bank, Joseph DePaolo, the CEO of Signature Bank, engaged in the sale of company stock.
Due to health concerns, DePaolo did not attend the Senate hearing. Instead, Signature’s co-founder and the bank’s president testified in his place.
During the hearing, Becker endeavored to present Silicon Valley Bank as a casualty of various elements, including a bank run fueled by social media. However, politicians from both political parties remained unconvinced and directed their inquiries toward the bank’s management shortcomings in foreseeing the detrimental consequences of increasing interest rates on its financial position.
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