Transcripts For CSPAN3 Failed 20240706

Is titled concern continued oversight on Regional Bank failures. Without objection, all members will have five legislative days to submit extraneous materials to the chair for inclusion in the record. Without objection, the chair is authorized to declare a recess of the committee at any time. With that, i now recognize myself for four minutes. Todays hearing will help the Financial Services committee learn more about recent Bank Failures, including management missteps, supervisory failures, and rapid fire bank runs in the age of social media. I think our witnesses for testifying today. The recent banking crisis was fueled by failed Bank Management, lack of hedges against Interest Rate risks, failed military policy, failed supervision, and overspending by the administration and democrats that led to historic inflation, prompting increased Monetary Policy action. Today, we will hear about what went wrong from the Bank Management themselves in state regulators. This is important, as the committee is still waiting to get information from federal regulators about what happened. Information has been provided to the Government Accountability office, but has not found its way from federal regulators in treasury to this committee. Instead, individuals at the fed, fdic, in state regulators all the states do their own self assessments of the recent bank and supervisory failures, and hastily put out public facing narratives before independent assessments can be made. Todays hearing will help fill in some of the gaps that remain, given the lack of transparency and accountability from federal regulators. To improve matters, i put forward five bills increase transparency and accountability a federal regulators in their actions, especially when emergency measures are employed. We are not here to defend management movements that failed or to put anyone on trial for prosecution. And looking at the recent Bank Failures in the continued turbulence in our Banking System, it is important to acknowledge that the Bank Failures did not occur in a macroeconomic vacuum. We have seen runaway inflation that was fueled by reckless, nearly two trillion dollar American Rescue plan in march of 2021, one personal saving economy what was already an astounding 5. 7 trillion dollars. Inflation continues to hammer american families, and the Federal Reserve was late to respond. Because the Federal Reserve failed to tighten Monetary Policy in a timely manner, Interest Rates were boosted at the fastest pace in modern history. That rapid Monetary Policy shock injected increase Interest Rate risks into the economy in general, and banks and Balance Sheets in particular. Federal regulators and supervisors were again late and responding. They relate even realize the rapidly growing Interest Rate risk called for increased supervisory vigilance and prompt corrective attention to banks that face the largest risks. Reading the hasty review of the regulators, things that failed at mismanage risks or inattentive to Risk Management gaps that supervisors and examiners have identified, and sometimes were not adequately responsible or timely in taking necessary mediations. According to their narratives, regulars face staffing issues and maybe couldve been more forceful and working to get timely or remediations. Its impossibly important issues are brushed aside by the regulators reviews. Prior to the big players, they have been years of work from home in virtual rather than in person Bank Examinations because of covid restrictions. That fact, however, received only a few sentences in the federal report on svb, identifying only the quote, covid19 examination a search of the fdic review of Signature Bank for the word covid provides one instance. It seems that such a factor many others Glasgow Village reviews deserve more scrutiny. Hastily produce reviews by regulators or native for public release around the same date calls into question the extent to which narrative setting, rather than establishment of actual facts, was the motive for the reviews in public reports. Those reviews were led by individuals from the fdic and fed and not for the full boards, so that they provide only one limited side of the story. I welcome the views information that we will hear today, especially considering the lack of transparency and accountability from our federal regulators. And i recognize the chairman, or rather, the Ranking Member of the subcommittee on financial to shunts airy policy. The gentleman from illinois, mr. Foster, for five minutes. Thank you mister chair, thank you to our witnesses for appearing here. My career in congress and on this committee began in march of 2008, which was an interesting time to be a new member of the Financial Services committee. We spent my first three years on this committee. First, dealing with the emergence and response to the financial crisis. Secondly, to identify the that were broken in the parts which werent. And deciding what needed to be prepared, and thirdly, to deal with the regulatory response, the doddfrank bill that basically into a couple months ago, had a pretty good record for vending largescale Bank Failures and financial crises. The financial crises that we are dealing with here is orders of magnitude than what we dealt with here. We should keep that clearly in mind. But when the machine breaks, we have to identify whether broke due to a design flaw or manufacturing flaw. That all the parts work as designed . Or was it simply subject to unanticipated conditions that are outside of its designed specifications and warranty . And so that is a lot of what this hearing is about. We have in front of us some of the key components in trying to keep a bank from failing, we want to understand a little bit more about the details of what happened there. Ha and so we also have to look at the changes that have been made externally to the Banking System. Having to do with the presence of the internet and communication, and if people are terrified now about the speed at which banking rants can happen, imagine will happen in a few years where everyone is using their chatgpt money manager, which will be programed to pull your money out the moment a banking man is detecting our system, how much capital and liquidity do you have to hold against that sort of environment . And so the environment is changing. But our first appears that we have to understand that if everyone played the roles as appropriate to the rules that are in place as a few months ago and the previous couple years, and i look forward to this hearing. Thank, you i yield back. Gentlemen i now recognize the chairman of the oversight committee, mr. Huizenga for four minutes. Thank you mr. Barr, chairman barr i should say, and im glad that we were able to proceed with this joint subcommittee. I think that this is important work that we do as we, on these very subcommittees, dig into the details and find out what are some of the most challenging issues that we have experienced economically here in the last couple of years. And i do want to say thank you to the witnesses for being here, because this hearing from you is vital. It is vital, as this committee continues its investigation into the recent failures of both Silicon Valley bank and First Republic bank. And in testimony today, we are going to hear, i imagine, some try to pin these Bank Failures solely on bank mismanagement. Some will try to pin it slowly on failed supervision. Some on president runs on deposits field by social media. I think that the reality is, and everybody up here realizes, that it is a combination of all three of those things. Coupled with high Interest Rates, years of easy money, as the chairman was highlighting, and stimulus field consumer spending, this administration and the fed overheated our economy and then relate to pump the brakes, or to borrow the punchbowl analogy from alan greenspan, no one had the courage to take the punchbowl away from the party. And so im sure some of my colleagues already let you off the hook and maybe try to change the narrative. It should not be understated that the management of each of your banks is questionable at best. You are not at managing both short and long term risks. You quoted deposits from risky businesses. Took untenable financial risks, and ultimately failed to respond to rising Interest Rates. And mr. Becker, you relationship with the San Francisco fed should be scrutinized. At the time is a failure, svb had 31 open supervisory failures or warnings from regulators, and yet nothing was done. It is not gonna notice that your position on the feds board of directors potentially created a relationship that impeded supervisors judgment and created some of that leniency. And for their part, the Federal Reserve missed or ignored all of the signs. And when they did react, it was too late. Yesterday, in testimony before a committee, the vice chairman of supervision, mr. Barr, the other mr. Barr, at the Federal Reserve admitted that we what we have all known for months. The failure of your banks was a result of failed supervision under his watch. He finally admitted that you had the responsibility of that. However, federal regulators will attempt to use these Bank Failures techs are size more and more authority well outside of the bounce that congress established for them, and the notion that these failures were a result of regulatory changes is unfounded, as we heard from the g. A. O. , their reports about the fed started in 1991, not 20 1 55. It was 1991. Nevertheless, regulators will try to shift the blame, but the facts are clear. And in testimony before our own Committee Last week, the geo flag those concerns and supervision enforcement practices, going back to 1991, report concludes that all three federal financial regulators have quote, why discretion choosing from among Enforcement Actions of varying severity, close quote. Lastly, an independent assessment of these events is not only appropriate, but its desperately needed. This committee is committed to providing the american taxpayer with an unfiltered review of the events that preceded these bank collapses and ultimately they bear the cost of your failures. I look forward to hearing from each of you as we continue to seek these answers, and mister chairman, i yield back the balance of my time. The gentleman yields back, i now recognize the jeweler from texas, the Ranking Member the oversight and investigations have committee mr. Green for five minutes. Thank you mister chairman. Mister chairman, holding this oversight hearing today with the former chief executives of Silicon Valley bank and Signature Bank will allow important questions to be asked, and answers to be received from those who purchased the root cause of the banks collapse. And yesterdays hearing, regulators acknowledge their shortcomings. Todays preeminent question is, will todays bankers acknowledge their fault . Will they take responsibility for the more than 70 uninsured deposits that alarmed depositors. Well they acknowledged both Silicon Valley bank and Signature Bank experienced outsized growth between 2018 2022 . And that Signature Banker from approximately 47 billion in total assets in 20 18 to 110 billion in 2022. That Silicon Valley Bank Increased from 56 billion to 209 billion over that same period of time. Will they admit that this outsized gross is in assets was filled by more than 70 uninsured deposits at both banks. For higher than the medium of 32 for conquerable banks. Will they confess that the executives of both banks knew or should have known that their Risk Management practices had to be strengthened appropriately as they grew in size exponentially. Will they concede that it was irresponsible for Silicon Valley bank to operate without a chief risk officer from april until december 2022. Will they agree that those who nurtured the root cause of a base collapse, should return any bonuses receive as a collapse came to fruition. Will they allow and a vow that upon Silicon Valley bank having received 13 of the most serious supervisory warnings that the fed is issued, the banks officer should have taken corrective action. And will they come clean about Signature Banks failure to take corrective action after having received nine matters requiring border tension notices from the federal deposit insurance corporation, including three specifically relate to liquidity or Risk Management. Mister chairman, the time for atonement and recompense is at hand. Today provides us the opportunity to hear from those who had a hands on experience with the failure of these banks. These persons were capable, confident, and qualified. They all have degrees indicating such, and they have experience keynoting such. They should have taken corrective action. They will be given the opportunity to answer these questions that i have called to the attention of not only this committee, but also of this country. The people of america need to know what happened at these banks. This is a time for us to find out. I yield back the balance of my time. The gentleman yields back. And i recognize the gentleman from north carolina. The chairman of the full committee on Financial Services. Mr. Mchenry for two minutes. I wanna thank chairman barr in the right numbers as well. The days hearing will hear three different stories from three different banks. The Business Models were not the same. Youre depositors one of the same. The degree of mismanagement was not the same in the midst of this crisis. The truth is, each of you bears responsibility as captains of your respective ships, and weve heard that for me. There is a storm brewing, and you failed to batten down the hatches. And while inflation raged, the fed in the biden ministration told us it was transitory. Nothing to worry about. But we will get into the management question shortly, but one of the mistakes though is that these three bankers actually believed the bureaucrats. We all know inflation was not transitory, and after being late to respond, that was forced to raise rates at the fastest pace in modern history. And again, failed to properly prepare for this inflationary and high Interest Rate environment. Silicon valley bank was the projectile that set this volatility into motion. The Biden Administration used another word to describe svb. Idiosyncratic. Well clearly, three of you today, three of the 30 largest banks in american history, in america today, and the problem goes much deeper. The subsequent failures of signature in First Republic coupled with the volatility and Regional Bank stocks sent shockwaves their Financial System. The fear of contagion has rocked an already shaky economy. Its a well hear from each of you today, in new york in california think regulators as well. I think its important to take a step back and really examine the undercurrents the cause this crisis. The economic mismanagement by the Biden Administration, he quit the perfect storm that each of you failed to write your ship in. I yield back. The gentleman yields back. Today we welcome this testimony of mr. Greg becker, former ceo of Silicon Valley bank. Mr. Scott shea, cofounder of Signature Bank, and mr. Michael roffler, ceo of First Republic bank. We take all of you all for being here, you will all be recognized for five minutes to give an oral presentation of testimony but without a objection, all of your written statement will be made part of the record. Mr. Becker, you are now recognized for five minutes. Huizenga, Ranking Members green and foster, and member of the subcommittee. Thank you for the opportunity to appear before you today. My name is greg becker, and i was that ceo 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 this situation. I was employee for svb for nearly 30 years and ceo for the last 12 years until it was taken over by the fdic. I believed in the bank and its mission and care deeply about art more than 8000 employees and their families. I was committed to our clients and helping them succeed, whether there were wellknown Tech Companies or Small Business founders across the country. Svb was designed to meet the needs of technology and Life Science Industries for startups and later Stage Company could keep their deposits. If i were to expand their businesses and create jobs. We do our clients personally, understood their needs and goals, and partnered with them as they groom. Who took Risk Management seriously, and worked closely with and more responsive to the various regulators who oversaw svb. Overtime, we built and expanded a focus on analyzing this in protecting the bank. And we sought to add expertise and experience to enhance our Risk Management as the bank, and its clients involved. Much has been said about the takeover of svb by the fdic and why it happened. Ultimately, i believe that as bbc failure was brought about by a series of unprecedented events. Between 2015 to thousand 19, svb grew from 45 billion abscesses 71 billion in assets, i dont annual rate of about 10 . The strange in 2020 due to the covid19 pandemic and the government stimulus measures. With near zero Interest Rates and the largest government sponsored economic stimulus in history, more than five trillion dollars flooded into commercial banks of the mid states. By the end of 2020, svb had grown 63 over the prior year, and in 2021, svbs assets grew another 83 to 212 billion. To support this growth, svb raise more than eight billion dollars of new capital in 2021. Importantly, throughout 2020 until late 2021, the messaging from the Federal Reserve with that Interest Rates would remain low and that the inflation that was starting to bubble up would only be transitory. During this time, as should be invested in low risk, highly rated government backed securities. The securities were safe assets, and they were backed by the u. S. Government and could easily be used as collateral for borrowing for liquidity if we needed it. These fixed Income Securities complemented are short duration Loan Portfolio. Approximately 90 of which had variable Interest Rates. In fact, of the u. S. Banks collectively invested nearly 2. 3 trillion of their securities portfolios in this low yield environment created by the Federal Reserve. To counter changing market conditions, nearly higher Interest Rates it has been over a longer period of time, im much eight we sold svbs available for sale securities portfolio and planned capital raise. Unexpectedly, on this same day, Silver Gate Bank announced its intent to voluntarily went down in the quid eight and depositors triggered a run on that bank. Despite stark disturbances in our Business Models, news reports investors wrongly lumped svb and silver gate together. Rumors and misconceptions quickly spread online, culminating on march 9th with the first ever social media driven bank run, leading to 42 billion in deposits being withdrawn from svb in ten hours, roughly 1 million every second. Over two days, 80 of total deposits were respected requested to be removed from svb. At the end president philosophy of this bank and contests, the previous largest bank run in u. S. History was 19 billion over 16 days. In the face of these are precedent events, the Leadership Teams made the best decisions we could with the facts forecast available to us at the time in the best interest of svb, its employees, and its clients. I worked in a place that i truly loved. Alongside our dedicated employees to support our clients who are innovating and astonishing ways. I believe it as we be had a positive impact on the roughly 100,000 clients. The gentlemans time has expired. Mr. Xi, you are not recognized for five minutes. Chairman barr, chairman huizenga, thank you for the opportunity to be here today to discuss the nature bank in my role as chairman of the board. In 2000, i cofounded Signature Bank. At the time, the Banking Industry was experiencing many mergers. Many big banks were not serving the needs of middle market customers. I felt that a mid sized banks would provide important commercial service to business that preferred a smaller, more personal experience. Signature bank followed a single point of contact approach where the banks clients teams personally serve the needs of small and medium sized businesses. Our bank had a Diverse Group of clients, including industrial companies, commercial real estate firms, Health Care Providers, professional service, nonprofits, in many others. We placed a priority on providing financing to Affordable Housing providers and low and moderate income areas, and its over many years. Through the hard work and dedication of our employees, we went from a small bank with 40 million in startup money to a successful middle market bank with more than a billion dollars, hundred billion dollars and assets. We were solid in a thriving bank that played an enormous and Important Role in our clients businesses, and i was very proud of our success. In 2018, we begin accepting deposits for businesses in the Digital Assets sector. I supported this effort, because i believe that Digital Asset Payment Systems could make Financial Transactions faster, easier, and cheaper. With funds moving from place to place in minutes rather than hours or days. And then a much lower cost than traditional Payment Systems. I was not alone in my enthusiasm for Digital Assets. Over the years, many, many other banks and many financial situations and others have entered the market for Digital Assets and governments, both state and federal, have expressed support as well. Its with other parts of Central Banks business, digital deposits grew overtime. Nonetheless, it is a relatively new sector, signature monitor the business in the effort to make sure that clients mid standards, including for compliance with antimoney laundering laws. We also limited the kinds of businesses that we would do. The central bank Digital Asset business was focus on accepting u. S. Dollar deposits from businesses in this sector. Additionally, public a supported increased government regulation of the Digital Assets factor and we to ensure that businesses operating within the sector had Regulatory Oversight. And the latter part of 2022, the Digital Asset sector experience increased volatility and regulators expressed concern. So your bank took these developments seriously, and just a few months, significantly reduced its asset deposits, Digital Asset deposits. Unfortunately, a series of extraordinary unprecedented events unfolded quickly. On march 7th, the bank was the distal aspect sectors that i was running out of business. Three days later, on march 2nd, a second bank was closed by the regulators. And then, within just a few hours, our depositors withdrew 16 billion dollars. Nonetheless, i was confident that central bank could withstand the economic earthquake that occurred that day. The bank was well capitalized. The bank was solvent. It was always solvent. Who is well in excess of liabilities even to the variant. And solid plan to continue a plan to withstand additional withdrawals. Although i believe the bank was in a strong position to weather the storm, regulators evidently saw things differently. On sunday, march 12th, regulators seized Signature Bank. Although i disagreed with this decision, i recognize the Important Role of the Bank Regulators playing in our Financial System. My First Priority in helping to build Signature Bank was providing Excellent Service to our customers. I was there for police to the government guaranteed full amount of customers deposits. Having built a bank that for 22 years played an Important Role in the middle market sector of our economy was the pinnacle of my professional life. For that reason, march 12th 2023 was a devastating day for me. The gentleman yields back, and mr. Roffler, you are now recognized for five minutes. Thank, you chairman mchenry, chairman barr, chairman huizenga, Ranking Member fostered Ranking Member greene and members of the subcommittees, good morning and thank you for allowing me to speak with you today. Since 2009, i have had the privilege of serving First Republic bank and its employees, clients, and communities. I look forward to sharing with you a little bit about First Republic, our reputation for Risk Management integrity, and as well as our understanding of the unprecedented banking crisis that affected us beginning on march 10th. I would like to start by thanking my incredible colleagues, who have worked tirelessly since march 10th, continuing to serve our clients and delivering Outstanding Service in the face of unprecedented challenges. For the past 37 years, First Republic has built a reputation for its commitment to Extraordinary Client service, careful Risk Management, robust internal controls, in transparency with our regulators in the public. First republics financial position strategy were regularly reviewed by regulators. The california d fbi and the fdic. First republics manager board of directors took regulatory feedback extremely seriously, and just any manners in a timely manner. Either regulator expressed concern regarding First Republic strategy, liquidity, or management performance. Just the opposite. Up until the cataclysmic event of march 10th in the following days, which were triggered by the collapse of Silicon Valley bank and Signature Bank, First Republic was in a Strong Financial position, with strong Investment Grade ratings island with the nations largest banks. In fact, thanks to our employees extraordinary efforts, First Republic had its most profitable year ever in 2022. Starting in the fall of 2022, First Republic believed that the Federal Reserve campaign to fight inflation by repeatedly and significantly raising Interest Rates would make 2023 a more challenging year from an earnings perspective. First republic was transparent about the challenges posed by this higher Interest Rate environment. No one at First Republic could have predicted the collapse of Silicon Valley and Signature Bank, the speed at which it happened, or the impact it had on Banking Industry. Instead of dealing with temporary decreased earnings, due to Interest Rate pressures, this republic was contaminated overnight by the contagion that spread from the unprecedented failures of those banks. For march 10th, First Republic was conducting a business as usual. Indeed, during the day on march 9th, as uncertainty surrounding Silicon Valley grew, we experienced a significant inflow of deposits had First Republic from clients who have withdrawn their money from Silicon Valley. Everything changed overnight. On the morning of march 10th, one Silicon Valley collapsed, a run on First Republic began. In response to an industry wide pandemic about the soundness of Regional Banks, industry wide panic about the soundness of Regional Banks, which was exacerbated by traditional media and social media, over the course of the ensuing weeks, over 100 billion in deposits were withdrawn from the bank. Despite herculean efforts by my incredible colleagues at First Republic to continue providing exceptional clients of us, managements tireless efforts to save the bank, and the support of 11 of the nations largest banks, investor and depositor confidence never recovered. Throughout this period, i encourage colleagues to be there for and serve the needs of our clients. The clients continue to withdraw their funds, into protect our climbs in the positives, the fdic reached a purchase in assumption agreement was Jpmorgan Chase to assume all of the deposits and substantially all of the assets of First Republic. We continue to work hard every day to ensure our clients receive the service that they deserve. I look forward to working with the committee to restore confidence in the Banking Industry, and i would be pleased to answer your questions. I think the witnesses for their testimony. We will now turn to member questions, and will recognize myself for five minutes. Let me start but following up on the line of questioning that i asked vice chairman barr yesterday, and i asked mr. Barr if the delay in Monetary Policy normalization in light of persistent and high inflation, i asked if gradually tightening Monetary Policy versus precipitously raising rates would have made it easier for the fed to supervise and banks to manage Interest Rate risks. He declined to acknowledge that Monetary Policy failures by the fed where the underlying cause of the current instability of the system. While i do agree that it is the responsibility of Bank Management to manage Interest Rate risks, i believe that we should also acknowledge that the feds unprecedented and protected easy money policies and keeping Interest Rates too low for too long necessitated a historically rapid in precipitous increase in Interest Rates. 500 basis points in just 13 months, leading to a blunt and difficult Interest Rate environment for institutions to adjust to. Mr. Becker, did thank supervisors at the Federal Reserve of San Francisco show any extra attention to Interest Rate risk issues, and if they did, when did they begin to show that intention . Chairman barr, to my memory, the rapid rise in Interest Rates were going back to 21. That topic coming up, i dont remember that coming up the best of my recollection. So youre telling me, as the San Francisco fed 20 Bank Examiners in your bank every day, not once in the last year do you remember any of those Bank Examiners discussing Interest Rate sensitivity with you. With me . Again, my memory is no. It couldve happened with our Treasury Team, our cfo, but i dont remember having a direct conversation about that. Mr. Becker, Silicon Valley bank did not have a chief risk officer pigments up to its failure. Clearly, there are major Interest Rate restore obviously not being discussed by the Bank Regulators with you all. But it is safe to say the chief risk officer wouldve been a useful addition to the Management Team. What were your conversations with the fed on this issue, and had a voice any concerns with the vacancy or request that you take action to fill the position, and if so, how did you respond . Chairman, as outlined in my written testimony, towards the end of 21, and the beginning of 22, our board of directors and the regulators, the Federal Reserve were giving us comments about the need to enhance our chief risk officer position, especially as we start to approach 250 billion dollars of assets. We took that feedback very strongly, and we decided to make you change. So we did two things, knowing that takes quite honestly a while to find the best candidate for a role. In my assessment, it takes 6 to 9 months to find an executive at the caliber that you would want. We did two things to make sure that we did not have gaps during that time, of which both of those things were noticed and before we made the change, communicated to the Federal Reserve. First, we created a office of the chief risk officer. It was Leadership Team with a risk team along with new hires with qualify experience. Those images reported to me, and they also reported to the chair of the committee. The second thing that we did, we kept our existing chief risk officer as a consultant from april until october one. One chief risk officer started it was hired october, and then she started in december. After the fed expressed any concern that despite being in office, there was not a position filled . They did not. Okay, mr. Roffler, its our understanding that prior to entering receivership, you had all options on the Table Including the sale of your bank. Can you describe the difficulties you faced and finding a potential acquirer . If you could turn on your mic. My apologies, thank you mister chairman. Yes, following the events of march 10th and shortly thereafter, we worked with our Legal Counsel and our advisers to look at all options on the table, including potential merger in potential sales of assets. Did the fdic begin to gather Industry Data about your brain to put into acquires prior to the week of april 24th . Not to my knowledge. Mr. Becker, fdic chairman say that the ftc couldve moved and finding a buyer for Silicon Valley bank, saving the hit to the death, if there transferred and see and setting up data rooms. Can you explain perspective on how the process works, and whether the fdic couldve done better. So again, this happened very fast. And so on march 9th, which is really the first day that the bank one started, the fdic got involved. And then they took over on the tenth. We immediately worked with them and work as fast as we could to build a data room with the list of information that they were looking for. My time is expired, obviously it was not fast enough. I now recognize the Ranking Member of the subcommittee on financial to shunts and Monetary Policy, mr. Foster, for five minutes. And thank you mister chair. Mr. Becker, i accept what you said that you never envisage the situation of the Silicon Valley bank, but my focus here is what rules could have been in place that would have changed your behavior. Im actually spent a lot of the last few weeks thinking about what you should have done, if you had perfect knowledge ahead of time, and high on my list i simply hedging your Interest Rate risks instead of apparently removing some Interest Rate hedges, and also raising capital last summer when its still could. Are there other major things that you wish you had the foresight to have done . Congressman, maybe just to comment on your one point about capital raising, our capital ratios even up until march 10th actually very strong. But i understand, but one of the rules changes that we could make is to meet the recognize some part of your mark to market losses on securities. And that is, when my followup questions here, which we can try answering now, lets say that you would immediately had to recognize 1 of your actual market mark losses. With that affected your behavior materially . Congressman, the mark to market is into categories. What is your available for sale portfolio, all of it, just to take an extreme case, all of it. Yes, if everything with available for sale and held a majority was marked to market, yes, we wouldve had to raise more capital. But then that wouldve happened early last summer probably when Interest Rates start going up . Yes, when a mark to market occurred correctly. And then all probability, youd be solvent today if that had been the role . Im not saying that should be the rule, but there is a knob that we can adjust which is what the fraction of the mark to market losses should be immediately reflective. Congressman, as i mentioned my testimony, i believe that this was an unprecedented event. At the end, it was fueled by the fastest bank run in history, and i dont believe that my opinion, even with Additional Capital, if i were to occur, i dont think that we could or possibly any bank could have lived with that amount of deposit outflow and that short of a period of time. Well there are many many issues there. And there were also governance issues, and so some fraction of the regulatory findings would automatically have been made public, particularly the governance ones, one of the things that makes this hard for us in congress to deal with is that a lot of regulatory actions have to take place and secret, but if there was some fraction of things, for example, governance, that would automatically become public, with that to maybe act more quickly on the risk and absence on risk. Congressman, when the first discussion that i recall having with the regulators on the governments, questions of governance, was in january of 2022. And as soon as those conversations were had, we immediately reacted to that feedback. We dont wait into the may 22nd when a 22 letter. We immediately reacted to it. And we put together a whole series of programs and processes to make the improvements that were requested. And so i dont believe that you believe the threat of making the public wouldve exhilarated that at all . Okay. And so now if during the period of europe and growth, you have been forced to issue a contingent convertible that, as all of the asian banks and european banks this wouldve forced a conversation with the bond market as to the risk of the position of your bank. And that also divided a capital buffer that you would have access to when you got in serious trouble. Would this have materially changed your behavior, or the result . You can answer, that its a complicated question, if you want to answer that in writing for the record, i appreciate it, because that is one of the things that i think with the chairman and i think maybe part of the solution here to make it more stable Banking System, and i would be interested in your thoughtful opinion. The congressman is mentioning in my written testimony, i dont have access to information from the bank, and so i would do my best with the information that i have to and your question. This will not be an exact calculation of what wouldve happened. Id be interested in your opinion. Mr. , it seems like the most significant factor it signatures demise was not so much a concentration of Crypto Assets or deposits, but a lack of tangible assets immediately bailable for liquidity support. Other changes in procedures or rules to make that more agile, that you would advocate. I dont know the answer that question. I do know that when we open at the beginning of march 10th, we had 29 billion dollars of illegible assets that were at the federal bank in the Federal Reserve, and in terms of the ease of moving those assets, that was something that could be looked at in terms of making. That will have to move, on the gentlemans time has expired, and i now recognize the chairman of the subcommittee on oversight and investigations minister huizenga for five minutes. Thank you chairman barr, i appreciate the witnesses being here and your candor. Im going to ask you what i hear is to have the most important questions frankly it will go down the line asking you this. Versus whether you take responsibility for the failure of your bank. Mr. Begor . Mr. Becker . Congressman, as ceo, i think you have to take responsibility for the ultimate outcome of every institution. As chairman of the board, i think i did a responsible role throughout unfulfilled my duties. Sorry, just a second. Do you accept the responsability for the failure or do you believe it was other management . Im sorry that the bank was seized by the regulators. I thought we had a responsible plan over the next morning. So i take that is now . Mr. Roffler. Mister chairman, this was an event that isnt foreseeable when it happens, and the contagion spread very quickly and panic is very hard to control. What i feel responsible for is for our colleagues, each and every day, and our clients even every day to make sure they are taking care of and supported during this time. So that also sounds like an oh, so congratulations mister becker, you are the only went to man up and actually take responsibility for that. So, i will start with you, and since i cant get the other to actually admit to their own failings, id like to hear from you. Would you have done differently in hindsight . Congressman, that question to the point made earlier by congressman foster, i thought about that a lot over the last several months. And when you look back with hindsight i what couldve been done differently than i think it is very challenging because when you make, then you go back and make decisions, you have to go back and look at the fact that you had. When it tried to describe in my written testimony is that the facts that we had, that i had when i made my decisions, and i believe my team had i truly believe that they made the best decisions as the day with the information that we had. We are going to explore that a little bit more. And you testified svbs cap on the quarterly work validated by regulators in 2022. You are in a statement points on august 2022 letters and by regulators they conveyed second highest possible camels rings of two, meaning that satisfactory on and downgraded the liquidity rating when you receive the supervisory letter. Were these ratings cause for alarm, or did you confirm that you are on track, and then i also wanted to address only the said to chairman barr. He said the fed did not talk to you about the Interest Rate risk. They had 31 matters requiring attention, but none of them were about Interest Rate risk . Talk to me about that. Congressman, the best of my recollection, i dont recall a direct conversation about that. I know that i believe towards the end of 2022, there is a matter requiring attention an Interest Rate risk that was issued. That was, i was not in the meeting in late 2022, i believe that was in late 2022. Until that time, im confirming what you are saying in chairman barr, but this was not an issue for a regulator. Congressman, to the best of my recollection, i dont recall. Well you have of understanding to target matters requiring media tension. What were the major issues at that to your recollection . Congressman, if i can clarify one point. The understanding was never issued. It was verbalized to us, and it was verbalized in early 2022 that doesnt really sound like a memorandum. Thats on like a conversation if im understanding. All right, so did regulators follow up with you on the status of this mou conversation or ask for your timeline or give you a timeline . As i mentioned earlier, we were incredibly responsive the feedback that we received. And well quickly, we have 30 seconds, and you testified that you offered several times the ftc to quote engage potential acquirers and run through a list of the names but you believed would be most likely acquirers, and every single bank ive ever talked to, big, small, or medium, as always had some conversations with competitors who might become allies. He stated that you offered your assistance, but the fdic never consulted you in this. Can you confirm that, and what do you think that they didnt, and then they give you any indication of why they had no interest in your opinion on this. Congressman, i can confirm that they did not engage me and reviewing a list or talking about any potential acquirers. That is a, i yield back. Gentlemans time is expired. I now recognize the Ranking Member of the oversight investigation subcommittee, mr. Green, for five minutes. Thank you mister chairman. Chief executive officer becker of Silicon Valley bank, were you a board member of the Federal Reserve bank of San Francisco. I was. Educated well in banking . We are educated well and banking . Ive been baking my entire career. The republicans, my colleagues, who i love dearly, they seem to believe that failure to sufficiently punish you is a cause of the banks failure. Theyve been alluding to this for days now. In fact, perhaps even weeks or more. Are you contending that because the regulators did not punish you properly, your bank failed . That would be a yes or no, sir. Congressman, we sir, that would be a yes or no. Are you containing the failure of regulators the fun issue properly is a cause of the failure of your bank . Congressman that would be a yes or no sir. Would you contend that the failure sir of regulators to punish you is y banks failure. Congressman, we were responsive to the regulators. The question is not whether you are responsive sir. Please, are you blaming the regulators for not punishing you. So if they had punish you, its what youre seeing now, you wouldve done better, is that what we would understand . A man who set on the Federal Reserve board, ill be educated, is that what we are to understand . Congressman, as i articulate my written testimony, there was a series of unprecedented events that all came together. But that is not the question. You see, you are issuing the answer and the question, i might add. The question is about you, your experience, and whether youre not going to blame a lack of punishment. You dont differ with them. I understand it. But this is a time for truth. You have to speak truth, sir. You know that the failure of regulators to punish eu is not the reason your bank failed. Congressman, i believe for regulators, as the svb Management Team, did the best they could with the information that i have. Thank, you that is efficient, i appreciate you saying that, because for too long now, my colleagues have contended that it is the regulators who are at fault here. The regulators are not a fault. They have some things that they could have done, perhaps, and should have done. But at the end of the day, according to the Government Accountability office, and according to the regulators who were here yesterday, the banks failure lies with the banks. At the end of the day. Now let me ask you another question. And this will apply to all three of you. Just raise your hand, because i dont cant ask you individually, i dont have time. In a view conferred with the president about Risk Management and banking. If so, raise your hand. Any of you. President biden. That is a reason to the question. But the record reflect that no one has raised their hand. The convention for my colleagues is that this is all President Bidens fault, because of President Biden, you somehow made mistakes in your Risk Management practices. You did not talk to President Biden. You dont base your decisions on news reports about Interest Rates that you cannot validate or at least have your Risk Management people give you some confirmation on. And if you think President Biden calls you to make the decisions to make his decisions, raise your hand. Let the record reflect that none of the witnesses has raised their hand. Finally, this. Do you think that the bonus, as received, mr. Becker, chief executive officer, should be returned . The bonuses received at near the time of the collapse should be returned . Congressman, that would be yes or no. With the process thats going to be given but do you think that they should be returned . Congressman, i will cooperate with the process. Ill give you some call back Registration Fee to cooperate with. I will yield back. The gentleman from florida, mr. Potency, is now recognized for five minutes. Thank you very much mister chairman barr. We heard in exchange a while ago from member on the other side, talking about 2008, and he was reminiscing on some of the circumstances. They went very pretty. But one thing that was resolved but the party in charge of that time to make sure that we never had another bank failure of an economic crisis, they establish the cfpb. The Consumer Financial protection bureau, and amongs charges was to make sure that we never had any more Bank Failures. And im just wondering, did you have any contact with the cfpb, mr. Becker . The cfpb was one of our regulators, they give it that we are predominantly a commercial bank, interaction with the cfpb it wasnt as significant as the other regulators. It was less significant with the other regulators, i had that correct . In the Federal Reserve in the state in the fdic. Mr. Shea shay, same question. And i will chairman, i dont recall ever meeting somebody from the cfpb. Mr. Roffler, same question. I dont believe it with anyone from the cfpb but they did periodic exams in visits to First Republic. And you think that the cfpb, mr. Roffler, couldve been more helpful . And helping you avoid i think the cfpb, along with other regulators, interacted with, we ensured that we had a very professional relationship, and we shared with them what the bank was up to and with the strategy was and how results were, and they did a thorough examination, and so we responded with feedback. Mr. Becker, did you steal, convert, or otherwise effect and if you stop in the 12 months proceeding . I sold, there is no stock that was sold in 2022 into the mic, i cant hear you well. There was no stop, and so many stock in 2022, and in 23 i sold after earnings release, after was reviewed by our legal team myself that i did not have inside information about it and be 51 plan in place in january, and that was sold with expiring Stock Options from 2016. How much was that, the value of the time of that probably . The gross amount was three point 6 million. Okay. Mr. Shay, same question. I sold no shares i sold no shares, i sold new shares in 2022 with the exception of reversing three shares that were accidentally bought in my account, which were then sold back, those are three shares, indeed i purchased shares throughout that period. In 2023 . 2023 are purchased shares on march 10th, 2023. And mr. Roffler . I transacted twice, once in 2000 2022, and once in early 2023. Both of those transactions were made with the approval of our apology procedure internal counsel. And were also made the following disclosure of Financial Information to the market, one, three investor, day number two, the earnings release, in the last thing i would say is that it represented a portion of my ears, and the vast majority of retained. What were the dates, the amounts of those transactions . The dates were about november 15th or 16th, and it was just over 1 million. The other date was there on january 19th or 20th, roughly the same amount. I see my time is about to expire. Mister chairman, i yield back. The gentleman yields. The gentleman from california, mr. Sherman is now recognized. Thank you. One thing i have commented on is the idea that the Federal Reserve regional boards are not only selected through democracy, the voters of this country, but governmental powers are given to those who are elected by banks. And they elected greg becker. Im not so sure it is a good system we ought to have all governmental power in this country in the hands of the executive, judicial or legislative branches of government. One Bank One Vote is not democracy. After hearing the near tearful presentations by the ceos, the dedication to their customers and employees, i guess they want us to say thank you for your service. Cant say that. My republican colleagues are in a desperate effort to defend corporate malfeasance with their own strategy of blame biden. In fact, what they have suggested is that we should not have fought inflation, and america should have higher prices, we should have managed all Monetary Policy so that the three worst run banks in america would survive. Talk about the tail why getting the dog. This was not the 100 year flood. We saw the 16 Interest Rates under the reagan administration. I did not say the harding administration, the reagan administration. This was a modest rainstorm. And the three of you went down. 99. 5 of the banks survived this modest storm. The reason why these banks went down is because recklessness and greed. The bigger the bonus, the bigger the risk, the bigger the bonus. And i will illustrate that in a bit. We should not be blaming the depositors. The depositors did not take their money out of profitable banks, they did not take it out of solvent banks, this is not a liquidity problem. The strongest bankers in this country look at Silicon Valley bank and determined that it was worth negative 20 billion dollars. If anyone has the money in a bank where the net worth is under, hes a negative 20 billion dollars, it is time to get your money out of that bank. Okay, so, Silicon Valley bank virtually doubled the duration and therefore increase the yield of the securities that it held, and that led to bigger risk, higher profits, and more money in mr. Beckers bonus for the 2022 fiscal year. Then Silicon Valley bank at the end of 2021 and 56 of its available for sale portfolio edged through credit default swaps. In other words, they had insurance on his 56 . They save money, cut the insurance down to ensuring only 2 of the portfolio, hired a lower cost, higher profits and bigger bonus. So it is not surprising that these are the banks that went down. Mr. Becker, you said you will take responsibility for the collapse of your bank. Are you willing to return the bonus that you got the day before the bank failed that even took on your hawaiian vacation . Congressman, as i said earlier, i plan to cooperate with the process. Will you would voluntarily, or only if the Government Forces you to . You congressman, i will cooperate cooperate . That means only if the Government Forces you to . Will you voluntarily returned that portion of the bonus, directly attributable to the bangs higher income for 2022 because he went to longer term, higher yield securities . Congressman, i will cooperate then its only enforced. Will you return the portion of the bonus attributable to the money you saved by throwing away your Flood Insurance as it began to rain, cashing it in and not having the edges and credit default swaps when your portfolio, will the return that part of the bonus . Again, not voluntarily. I will cooperate with the process. Mr. Begor, you testify before congress in 2015, but having tough regulation would divert significant resources of the bank to complying with enhanced provincial standards, and other requirements. So we have less regulation of your bank, how did that work out for you . The gentleman can submit his answer in writing. The gentlemans time is expired. The gentleman from missouri, chairman of the National Security subcommittee is now recognized. Thank you, mister chairman. Gentlemen, as tragic as the situation is, i think its also a learning moment for all of us, a structure moment for us in congress, for the regulators and bankers around the country, quite frankly. Standpoint i think where the new world now with regard to social media and the actions that can be taken, that can have adverse effect on our Financial System, culture and economy. And im very concerned about it. Each of you in your testimony mentioned mr. Becker, in ten hours, mr. Shea, 16 billion went out in a few hours, and mr. Admits the number on yours, you have the same situation where social media excite people to the four point where they ran out and change their banking situation. As a result, a lot of the uninsured deposits in the bank ran out. I would like for you to give me your analysis on this. What is the fdic tracking this with you as this was happening, so that they were aware of this, or you notifying them at all as this money was running out the door. Mr. Becker . Congressman, we were notified the regulators we were doing at the capital rates were aware of that. And when the bank run started on march 9th, i was not directly involved, so i cannot say the exact discussions that were happening. To my memory, to my knowledge, our risk team and Regulatory Affairs team were engaged in conversations with the regulators. Mr. Shay . As chairman, i dont know precisely the conversations that were taking place between treasury who was a contact, i guess is a question. Excuse me . Whats the contact between your bank and regulators in regard to the amount of money flowing out . I would defer to management. Mr. Roffler . Thank you for the question, congressman. As i mentioned in my testimony, we always had an open working relationship with regulators. That included as the contagion spread, on march 10th, we had multiple meetings in the morning, all the way through the evening that day, reviewing our funding, our liquidity and what was happening. I was on wall street during 1987. Panic that was flying through social media, people were saying they didnt want to hear about solvency, did not want him at 29 million liquidity, they did not want to hear about rating agencies, did not want to hear anything. They just wanted to hear that they got their money into a too big to fail bank, they needed it immediately. Mr. Roffler . Mister congressman, theyre a challenging. The panic was very real. As i spoke with clients at the end of every conversation, if they decided they wanted to do Something Different, weve facilitated that and help them, but definitely it was starting with the contagion which spread to us. This concerns me. Back in 2020, we had a run until a paper of all things and i think people will prioritize money over toilet paper. So we already have three examples over here and i think the regulators took some actions to minimize this contagion effect across the system where there was enough or not time, im not sure. I think its something we need to look at and study. Chairman barr was here yesterday, he made the comment, the corresponds ability of examiners to look at Interest Rate risk and equity. Risk we are looking at industry risk in your bank . Congressman, Liquidity Risk i know for a certainty that it was discussed. And again as i mentioned earlier, answer the question, i dont have direct experience in hearing about Interest Rate risks. But i am confident that it happened. Thank you very much. The gentlemans time has expired. The gentleman from georgia, mr. Scott is recognized. Mr. Becker over here, what percentage of your deposits at Silicon Valley exceeded the fdics insurance cap just before the bank collapsed on march 10th of this year . Congressman, as i mentioned in my testimony, ive been at espy for 30 years, and for my recollection, we always had a high number of uninsured deposits. It was not that much different at the end mr. Becker, i am sure that the whole nation, the whole world knows that you had a High Percentage. But in fact, according to the s p, Global Market didnt diligence, from december, 2022, we now know that Silicon Valley bank ranked first among banks with more than 50 billion in assets, with 95 of its total deposits being uninsured. That is the truth. And for you not to know that, for you not to answer that is absolutely unbelievable. While the average for u. S. Banks was 30 , you had 95 , almost all of your accounts, uninsured. According to the snps Global Market intelligence. Not only exceeding the fdics insurance cap, but doing so with this 95 in high concentrations, in the Technology Sector, making your bank highly susceptible to panic. I think you are going to go down in history as absolutely being the most irresponsible leader of a bank in the history of this country. To have 95 , almost all of your accounts uninsured. So not only were you exceeding the fdics insurance cap, but with this Technology Sector making your bank highly and susceptible to panic. So let me ask you this, mr. Becker. At any point leading up to march 10th, were you made aware of regulators concerns regarding your banks over reliance on 95 of your bank account being uninsured deposits . Congressman, to my earlier point, we as a commercial bank always had a high level of uninsured deposits. And to my memory the high level, you keep saying high level all of them even, i cannot even imagine that you are thinking at that. And you think that the American People are not highly disappointed in your total disregard of their money, in your hands, and you are not having it ensured. Less than 5 ensured. Let me ask you this, who made the decision to maintain this reliance on uninsured deposits, given the warnings, also by our federal regulators. Who made this decision, mr. Becker . This foolish, irresponsible and deceitful decision . Who made it . Congressman, as i said, that has been our Business Model who made the decision, my friend. Was it you . The gentlemans time is expired, he can submit an answer in writing for the record. The gentleman, the gentlewoman from missouri, miss wagner, chair of the subcommittee on Capital Markets is now recognized. Thank you, mister chairman. I want to thank our witnesses for preparing for the committee today. The reckless actions by you and your management put the paychecks of millions of americans and thousands of businesses some of which were in my district, missouri second can Congressional District at great risk. As these failed, i have businesses that provide good jobs in my district, left wondering if they would be able to even make payroll following this. Now yesterday, we discussed a supervisory failures, abject failures of the credential regulators is now abundantly clear that they should have taken stronger, enforced actions after many, many citations. Mris, mri aims to prevent these from happening. Today, i want to hear from you all as to why your banks were insufficient in addressing a rising Interest Rate environment which started over 12 months ago. Mr. Becker, as Interest Rates increased at the most rapid pace in modern history, because Monetary Policy had battled, runaway inflation, did supervisors at the fed show extra attention to Interest Rate risk issues . And if they did, when did they begin to show that attention . Congresswoman, as i mentioned earlier, we will look at the supervisory findings, we had one mra regarding Interest Rate risk, mainly related to modeling. Again, my mock memory, i dont recall that coming up as a major topic. What was the discussion that had been had, the main one was around liquidity. And we, to my knowledge, addressed all of the majority of those findings during 2022. Mr. Begor, by march 8th, 2023, when svb announced it was selling the available for sale a portion of its securities portfolio, the fed had already implemented nine Interest Rate hikes. Why didnt svb attempt to sylvies securities sooner . Congresswoman, the decisions around when to sell a security and what to do is monitored and managed by our offset liability can the, our Treasury Team and overseen by our finance committee. The first time that i recall coming up about the possibility of selling, our available, for sale portfolio was in the fall towards the end of 22. It was decided that at that point it did not make the most sense. There was believe that the rapid rise in Interest Rates could create and would likely create a recessionary environment and rates would start to go the other way. In the beginning of 2022, 2023, we realized that was unlikely to happen. And when you say we decided to then sell the portfolio. Mr. Begor, the fed report notes prior to 2022, that Silicon Valley bank had Interest Rate risk hedges on some or all of its longer dated maturities. The fed report further notes over the course of 2022, the bank pursued a strategy of dropping those hedges. Could you explain why you made the decision to drop these hedges . Congresswoman, two points. I will get to the insecure question. The hedges that were in place again, set up by our asset Liability Committee, Treasury Team, were only on a portion of our available for sale portfolio, which was a much, much smaller portion of the securities portfolio. I dont recall the specific percentage, but it was a small percentage of the overall portfolio. As far as the decision to sell the hedges, that decision was made by our Treasury Team and our asset Liability Committee. Would it have been more beneficial to your balance to two of kepas edges as long as additional Interest Rate hikes were on the horizon . I mean, the fed was clearly going to keep raising Interest Rates . Congresswoman, i do not know the exact rationale behind it. I dont have that information. Such poor mismanagement, so reckless. So many paychecks, 2 million on the line, many of which, my own district, i am disgusted. Following up, mr. Huizenga, i like to follow this, talk about potential inquiries, you said they did not engage you, i want to tell if you are surprised the fdic to take you up on the offer, and if you knew how many required, you can send that to me in writing, thank you, i yield back. The gentleman yields back, the gentleman from massachusetts, mr. Lynch is recognized. Thank you, mister chairman. I want to follow up on the young ladies line of questioning. Mister chairman, i would like unanimous consent to enter into the record, an article from the New York Times dated december 15th, 2021. Without objection. So this article, basically it says that the fed had made clear, and this was december of 2021, mr. Becker. It says that a fresh set of Economic Projections released on wednesday shows that ben officials expect to raise Interest Rates, now set to zero, three times in the following year. This was december, this was december of 2021. The fed went ahead and raised rates seven times in the following year, but they said they would raise it three times. And you are still loaded up with long term low Interest Securities which were uninsured. So you are basically, you failed to anticipate the impact that a rising rate environment would have on those deposits, no . Congressman, as i mentioned in my written testimony, this is very important. Our Balance Sheet is constructed on acid side with securities, and also loans. Those loans are variable ratings. Meaning as rates rise, we make more money. So my view is you have to look at the entire you had 97 of your deposits or uninsured. 97 . Those are the first deposits to run, these are the canyons of Bank Deposits. Theyre on the fastest and they run first. And, you failed to appreciate what would happen when rates went up. But the fed told you, they made public their attempt in december, 2021 that they will raise rates. So i am just, i realize, is this the period where you dont have a chief risk officer, is this correct . No, it is not. It is not . So what did your risk officer advise you at that point . Congressman, i dont recall specifically what the discussion was around that. And i know again, my memory is that so, look. It should not take a risk officer to figure this out. I mean, look. You had 91 billion dollars of assets, locked into long term, low Interest Securities. 91 billion. And as rates went up in 2021, excuse me, 2022, the value of those assets plummeted. They went from 91 billion, to 21 billion. And everybody headed for the door. How could you not anticipate that . How could you not understand the impact of a rising rate environment on your deposit base . I do not get. This and i find it hard to believe that no one at the bank anticipated this. What is your response . Congressman, what is this specific question . The question is, what was your alternative reality . If you are not facing the facts, and if you are not acknowledging what is going on in front of you, what is the alternative scenario, the reality that led you to keep these . And many of this, so, this 91 billion in assets were held to maturity. So that really frightened people when you had to start selling those at a considerable loss, and actually realizing the losses of his strategy. And i am just asking for an explanation of why you did what you did in the face of what was going on. Congressman, its a complicated answer. And, insensitive looking at the Balance Sheet, you have to understand the assets. Again, our loans were very low rate. They benefited from higher rates. Thats part of the equation. The other part here is what gets me. Earlier in your testimony, you are blaming the fed for not telling you what to do. Not raising the Interest Rate issue with you, when you know, a High School Student in economics, or finance would be able to figure out the danger that you are in. Mister chairman, i yield back. The gentleman yields. The gentleman from texas, mr. Williams is now recognized. Thank you mister chairman. Full disclosure, i am a car dealer from texas. And mr. Shay, in the recent new York State Department Financial Services, Internal Revenue regarding review, regarding the supervision of Signature Bank, it showed that your bank did not develop a controlled framework in line with growth, did not have a liquidity Management Plan that manages risk profile. In the past, leading up to Central Banks collapse, regulators identified weaknesses of the banks liquidity Risk Management gets Signature Bank failed to act or remedy these warnings. You are in the position you are in right now because you failed to adequately manage or Liquidity Risk positions. So my question is when you were made aware of these Liquidity Risks, why were they ignored . Did you express any disagreement with the fed regulators findings when they were laid out to you . Yes. As chairman of the board, i was aware of these. And the bank was taking substantial steps to address, including a proven stress test modeling, approving other modeling, diversifying further deposits, portfolio mix, limiting the amount of deposits, seeking additional sources of liquidity, in terms of, additionally, and i mean including issuing brokered cease which the bank previously did not find insured, entering repurchase agreements, or arranging to get repurchase agreements, negotiating repurchase agreements to primary dealers, tailing lending to lower the amount of need for deposits, and maintaining a high quality, a high quality lending portfolio as well as a shorter term securities portfolio, consisting of readily marketable Government Agency and other securities. In 2022, we saw the federal open rocket committee raise Interest Rates at a speed we had not experienced since the 80s. And i remember the 80s. In a belated attempt to adjust a runaway inflation by the American Protection plan, which injected 1. 8 trillion into the economy, these rising rates cause the assets of the Silicon Valley bank that invested into the declining value, we know this, and when it withdrawals in svb began to rise at a rapid rate, these assets were sold and a loss. So mr. Becker, when the bank invested 80 billion in longterm work backed securities, was there a plan in place to adapt to rising Interest Rates and to reduce the value of these bonds . And miss wagner touched a bit on that. So congressman, a couple of points. One is that investments which were made in 2021, those were invested in government securities. Those are very playable. If you need liquidity, you can borrow against them. By the end of 2022, we had 69 billion dollars of availability for liquidity at the end of the year. The second point is that those securities actually paid down. Roughly 12 billion dollars per year of those securities would amortize down. That was from the health and maturity portfolio. We also had availability with our available for sale portfolio. And then, our cash. So when we looked at it, we believed we had adequate liquidity to support several different scenarios. Okay, and finally mr. Becker, the bank did not have a chief risk officer. You spoke about that for eight months, from 2020 to january 2023. It seems your team did not care about risk. Even though there were several warning signs, it brought to light, you and your team did not think to address the risk, and someone in place to mitigate this risk. So you didnt bring on a chief risk officer in january, but proved to be too little, too late. So quickly, mr. Becker, during the time that Silicon Valley bank did not have a chief bank officer, who is overseeing the framework, whatever if they do make to define and hire a qualified candidate . Congressman, i respectfully disagree with the characterization that we did not take Risk Management seriously. You had nobody in charge, but thats fine. We had a team of people, Senior Executives in the risk leadership positions. Liquidity office of this cfo, chief risk officer, reported to the chair of our Risk Committee. And we were actively engaged in Risk Management broadly across the organization, him being responsive for regulatory feedback. Cut like my car dealers, selling cars to a sales manager. I yield. The gentleman yields. The gentleman from ohio, mrs. Bailey, is now recognized for five minutes. Thank you mister chairman, thank you Ranking Member. I am not sure where to start. So, let me start with making this statement. I want to take a moment, mr. Chairman to acknowledge the hardworking americans, who were harmed by this glaring mismanagement in your banks. Public Pension Funds nationwide lost millions of dollars which were invested in the Silicon Valley bank and Signature Bank. In my hometown, in my third Congressional District home of ohio state teachers retirement system, took the biggest hit. Over 27 million invested in your bank. Meanwhile, with reports that have come to light since the banks collapse in march, we know that executives at your bank earned millions of dollars in bonuses, sales, increased executive compensation, while you ran the banks to the ground. I dont need to go through this, we heard it on both sides of the aisle, from failing to address supervisory recommendations, taking on significant Interest Rate and Liquidity Risks, and inadequately matching the bank. Meanwhile, teachers, like my sisters, firefighters, other Public Servants lost millions that were invested through your public Pension Funds. So let me do two things quickly. Mr. Scott ran out of time. So any one of you can answer his questions. Who made the decisions to continue with these uninsured deposits . We will go down the line, just give me an answer. Who made the decision. Mr. Becker . The decision is around our uninsured deposits, relates to our strategy, which is been our strategy so who implemented this strategy . Who made the final decision . The strategy direction of as vp. A source drawn it . Do you take this . Okay. Thank you, again and thank you earlier, for acknowledging and taking responsibility. Mr. Shay, we will go on. Your answer . Yes. Does that mean that you take responsibility . The strategy was to serve mid sized companies but do you take the responsibility for that strategy . Strategy is a word, who implemented it, who is ultimately responsible, is that you . That was the founding principle of Signature Bank. Same question. The board of directors, executive management had a successful Business Strategy that lasted for 37 years. Well, the clock is running, let me go to the next question, please. Okay, now i have heard you. Been there 30 years, 12 years as a ceo, a lot of time. Founder sends 2000, cofounder of Signature Bank. Ceos and 2009, to present. How much money did you make . What was your salary for 2022, 2023 and bonuses . Salary, and how much in bonuses . Dollars and cents. For 2022 . Yes. My salary was just over 1 million. By incentive compensation was one point 5 million. Next . My salary, my last salary was 900, 000, and 1. 7 Million Dollar bonus. My last salary was 990, 000, my bonus was 1. 5 million. Okay. Do you know, let me start with you, mr. Becker. Do you know what amar a stands for, and mria, right . I do. So same for everyone, you understand what that is, right . Okay. So mr. Becker, it the recent report on the failure of Silicon Valley bank, and the Federal Reserve stated it issued multiple supervisory issues on mra and on mrias. 31 supervisory issues pertaining to capital planning, and positions, liquidity, Risk Management, government control, all these strategies we all talked about, including the Bank Secrecy Act and the anti money laundering, okay . 12 of the 31 open issues on the mria. For those watching who do not know, when you put the i in it, it means immediate. That means it need immediate attention. Can you explain to me after three years, why we still had, and up to the collapse, you had not answered those 31 . Only 12 . Congresswoman, as i said earlier, we were extremely responsive to the regulatory feedback. In all the matters you are describing. Do you know about the 12 . Sorry, my time is running out. Do you know what they were . I cant speak to every single one, but i know i am sorry. My time has expired. The gentleladys time has expired. The gentleman from georgia, mr. Luetkemeyer, the subcommittee is now recognized. Thank you, mister chairman. I appreciate you all being here today. This is a very important issue, as you are all aware. Mr. Begor, did chairman barr ask about the chief risk officer for Silicon Valley bank, and yesterdays hearing before the Senate Banking committee you said this was spurred it is improper recommendations from regulators who are concerned about the experience. You tell us a little bit more about the specific concerns, that the fed regulators had about your cras experience . Yes, congressman. As i described yesterday, the feedback was observations from the board of directors, from the regulators, from myself, internal audit. As we started to approach 250 Million Dollar levels, looking at individuals, especially in the risk area who had that experience of even larger institutions, was the feedback that we were getting. So thats what we acted on. And according to her public linkedin profile, she had over a decade of experience in enterprise, Risk Management prior to her six years at svb. In her six years of employment with you, what role did she play, in developing the bond portfolio which contributed to s the bees collapse . Our chief risk officer with a sat on our asset Liability Committee, and shielded in a voted member on that committee. Given that i was not on that committee and that there was not part of it i do not know the discussions she would have had in overseeing the overall portfolio strategy. I understand it takes time to find good executives. But why did you decide to dismiss her without having a successor already in place . As i mentioned earlier, based on the feedback, we thought it was best and we consulted with the regulators, including the board, driving this as the chief risk officer, into the Risk Committee. It was decided that having our chief risk officer on board as a consultant that is available made the most sense, to be built out to our office, the chief risk officer, and have those Senior Leaders in Risk Management reporting to myself, and reporting into the chair of our committee. You felt that was better even than keeping her in an interim position . We did. It is reported that svbs Risk Committee met 18 times 2022, more than double the number of meetings in 2021. At any point during these meetings was the Interest Rate risk on svbs Balance Sheet discussed . Congressman, the 18 meetings where it for a variety of different topics, around governance and controls, and looking at the metrics around whats called a Risk Appetite statement. It is what level of risk are you willing to accept as an institution. So the Liquidity Risk would have been the main area where that would have been stressed. And that was definitely discussed. Do you remember when the first time that the Interest Rate risk was brought up . Again, my recollection was that Liquidity Risk was one of the metrics which was reviewed. That would have been discussed across many of the Risk Committees going back for a long period of time. Would you say that was one of the compelling reasons why you had double the number of meetings in 2022, then you had in 2021 . I would not say that was the main reason or the compelling reason. It was really overall, enhancing Risk Management across the entire platform, including governance. So we had changed the Risk Committee structure about one year earlier. We were making sure we had the right risk governors across the entire platform. I also want to clear up some confusion regarding the office of chief risk officer committee, and the Risk Committee. Where these two entities the same . If not, or they substantially similar in composition and function . So the office of the chief risk officer was actually management level. It did not include any board members. The Risk Committee was a board level committee. Okay. I see i am quickly running out of time. I wont have time for additional questions, i will submit those for the record and mister chairman, i yield back. Thank you, violent yields. The gentleman from california, mr. Vargas is now recognized. Thank you very much, mister chairman. I want to thank you again and the Ranking Member for putting this together. Appreciate it. I dont like being in the position of a failure, i am a religious liberal. I believe in gods mercy and redemption, and when somebody is poor, and does something wrong, i believe in redemption for them. And when someone is rich, you know, when they fail, i believe in redemption for them. So i will not stand here and beat you up, i will not do that. I am disappointed, obviously. I think as all of us are. I hope that you cooperate with the government so that we can fix some of the problems. One of the problems that i see is that it seems like the banks, all of your banks were reactive, not proactive in this situation. I think you are calling it unprecedented circumstances in advance. And i agree with those. When youve somewhat money, run out of the banks so quick, and digitalized, it isnt foreseeable. Not unforeseeable, but it is unprecedented. What can we do to begin, i know those on the other side of the aisle think of deregulating the situation like this, probably most of us on the aisle, certainly me, i think of regulations, not deregulations. What can we do in this situation, the ones we find ourselves in, for banks to not have this problem . I see that this could affect virtually any bank except for the really big ones. Anytime social media, or short sellers decide to manipulate the stock, they can do that quite quickly through social media. All of the sudden, money can be moved. What can we do . What can the government do to prevent this so people dont lose their money . Who would like to take it, roffler, why they took a shot at this first, mr. Roffler . Sure. Congressman, thats a very good question. Obviously one that, reflecting on the last 60 days, i thought about frequently. Sitting here today, its hard for me to give any good advice for that. Because as we learned through march 9th, we were in a strong position. Yes, 2023 was going to be a bit more challenging. 2022, from an earnings standpoint, but when contagion hit after the failures of the banks, panic sets in. So i think my recommendation to others would be but sorry, for example, panic hits at wall street, we put in triggers, things that slow the system down. Is there anything that we could do for that . Could we slow the system down . I think the Banking System is sound. It is resilient, it is sound. But theres always the opportunity for panic, its always the opportunity to make money off of panic. Not everyone lost money in this deal, short sellers made money. You know, i think we need to investigate them and find that what happened. Is there something that we could do, some trigger, something that the government could put in place so we dont have these runs on the bank . I would share that on march 12th, i think the adopted one of the landing programs, which banks could utilize. I think banks did utilize that successfully. So i think that was a good step. But at the end of the day when the panic sets in, it is hard to regain confidence. So absent some evaluation of the insurance on deposits, which i know the fdic i think is requesting or, our proposal, i think that is one thing that would be worth looking at. Because that could at least calm the waters. I will ask mr. Shay that same question. Thank you. I cant give you a solution, but i can tell you what i believe is a problem that needs to be fixed. I certainly saw, it felt that friday afternoon. It was literally nothing customers did not want to hear, anything that i spoke to. They just wanted to get to, i remember, i need to get my money to Jpmorgan Chase because the government wont let them govern. I need to go to city bank because the government will make sure that they save them. They were panicked calls, are you to get my money to big to fail bank, because, im not a bank analyst, i dont know banking, im just running a plumbing supply, running a school bus, operating business. Im running a Health Care Provider service. Most of the time, deposits well in excess of the insured, they did not want to miss payroll. So it was really my time is up but i appreciate your answer today. I do think we need to take a look at that, i think when the panic sets in, there is no way to stop it in this situation. Thank you, mister chairman. The gentleman yields back. The gentleman from tennessee, mr. Rose is now recognized. Thank you chairman, Ranking Members, thank you to our witnesses for being here. I know this is not an easy environment. I appreciate you being here to share your insights with us. I want to back up, if all three of you will hang with me for a second, and go back three years or so and think about where you were and what decisions you are making in your banks, and then lets imagine that you could have seen forward, that your crystal balls were working particularly well. If you have known, i will start with you, mr. Becker, if you had known in 2022, inflation would reach a 40 year high, would you have managed the bank differently going into that period . Congressman, i think about your question a lot in hindsight. I think that is very hard. I go back and think about the decisions that were made. We did not have access to that information. We only had the information which was available to us at the time. But lets imagine that if you had known that, and if you could have anticipated the my guess is you are they different choices, is that true . I think if we knew prior, to making those decisions [inaudible] the attendant rising Interest Rates, he wouldve made different decisions, right . I cant say to what we wouldve done hypothetically, what i can say is that the plan but Signature Bank presented going on monday, march 12th is something we are entire portfolio taking any losses that were there and still, were well cannibalized, with every regulatory definition, Signature Bank portfolio, available for sale, it was out of control of the Interest Rate risk. There is not a substantial it was an issue, but not one which would have caused the bank to not be well capitalized and under regulatory standards. Mr. Roffler . Frank you for a question, mister congressman. I thought about this a lot. The reality for the last three years, frankly, the 37 years, [inaudible] we will continue to do that, we gauge the board, regulators. So i governor, i want to get through this. 3. 6 million stock personally which weve been right about that time and i was on the process was into the january six. You in that this was going on, the Jurist Committee sign off on that sale . The process, and this has been the process for as long as i have been in the bank, is that when you want to sell stock and put together these plans, it is viewed by our legal team. But given the timing, you understand my question . What is the Risk Committee, did they sign off . Was it just that they were notified . I do not know, i dont think the risk committed been notified, it was the legal team that wouldve concurred. You mentioned several times Interest Rate prior to 2023, you are insured against Interest Rate volatility . Can you clarify that question . You said you do not recall concerns they have an exposure to Interest Rate risks. Yet, you slow down 97 of your Interest Rate hedges on your available cell portfolio during 2022, was there a concern that you are over insured against that risk . Because there was a decision made to essentially take on long term risks in exchange for short term transfer equity . As mentioned as far as the decisions around the edges, two points. One, it was against available for sales portfolio which is the smallest yes, but it was 97 . You started with 15. 3 billion insured, and the 2022 with 5. 6 3 million insured. Were so, what answer the rest of the response for the record in writing, and we will take a brief five minute recess to allow our witnesses to take a quick break. I ask that they return promptly, and we will return in just a little after the top of the hour. The committee stands to recess. Taking a break in the senate Financial Services committee hearing, on the recent failures by Silicon Valley bank and Signature Bank. The hearing is expected to resume shortly. Live, here on cspan three. The National Urban league has repeated each year in the 1970. Mr. Morale, the name of this years report is that democracy in peril, confronting the threat within. Why that name . , first of all, let me thank you for having, me and good morning to all of the cspan viewers and listeners. That name because, when we look at the last several years. We witnessed a distinct effort to undermine american democracy. Just yesterday, for people were convicted in a federal court of attempting to overthrow the United States government. By blocking the transfer of power after the 2020 election. But now, there have been any number of people who have been indicted, whove tried, whove had their day in court, and theyve been convicted. So when we decided to dig deep into this very significant question and what we found is literally hundreds of bills introducing state legislature all across the country that had no purpose whatsoever except to make it more difficult for people to vote, with the target on the back of the voting power of black people. And some cases, latinos, in some cases young voters in some cases disabled voters and, at number two, we dug into the hate crimes numbers. And what we saw is a lot of hate crimes in america directed not only a black people but it jews, and muslims and Asian Americans and latinos and lgbtq americans, it is a stifling increase, and, to add to that, we see hate crimes that also include biotic acts of assault. Of killings, and when you take all of this together, is that the movements of hate in extremism, which has always been present in the United States has now been increasing into the mainstream of america. With some elected officials, some journalists, with people in occupied positions of this and channeling the rhetoric and the action of the movement for hate and a movement for intolerance, extremism, and white supremacy. The goal of it seems to be to undermine democracy, undermine freedom of speech freedom of press freedom to learn freedom over and the right to vote. So i would encourage people to look at the most numbers, take a look at the report, we have a number of people who contributed to the report, that governor a number of cabinet officers, of Community Leaders around the country who contribute to the report, as well as Research Partners such as the adl, southern poverty law center, and those who visit joyously care and track numbers when it comes to hate crimes so this is an important discussion for america, for a while, this targets much of this is black america. I want everyone to understand the target is to undermine this incredible institution called american democracy, which gives us all the equal right to sit at the table, elect officeholders and debate the issues that impact us. You start with the january 6th trial that you mentioned yesterday of the former proud boys members. Leading with, that on the report about the state of black america, do you think the target of january the committee will come to order. Thank you for everyones indulgence on the break the chair now recognizes mr. Buchanan for five minutes. Thank you, mister chairman. I would like to start with a question for each. On how many matter attention of mris, did your bank receive . We had 31 at the end. Thank you mr. J, how many . I dont recall. Was it more than zero . I dont recall. I recall it was more than zero maybe, but i dont recall. And . You we had zero. Zero. So its zero, how did you have zero if you eventually collapsed . As i mentioned earlier, i think part of my testimony, the bank maintained very strong communicative relationships with our regulars. We addressed feedback as it was received, they provided supervisory recommendations and we addressed them. If you think back to march 9th, it was a very strong day for the bank, and the bank wasnt a Strong Financial position and we were actually benefit from some of the uncertainty relative of banks. And march 10th, everything changed. Why you, why were you perceived as next . It is a very good question and one i am not sure i can answer. I think on march 9th late in the day, similar to how we were discussing earlier, you know, there was some social media thinking First Republican and Silicon Valley, im not sure about the geographic phase if it was a small client overlap base. All right, thank you. Mr. Becker, when the bank was reviewed by the fifth in 2021 in 2022, you alert of your Bank Management programs was not aware of your Liquidity Risk practices were a low supervisory expectations, what was your reaction to these communications from the regulator . Congressman, maybe two points around that. Maybe, one is that we certainly take all of the regulatory feedback into consideration and respond as quickly as we can, the second clarifying point is that really, how we were rated. The ella vibrating for liquidity was the second highest rating couldve been given, and there was a camels rating with the highest rating under the quitted e as well. Did your Leadership Team give you a rating that high, did they actually see a hurricane, nobody perceived any sort of hurricane winds coming in and say, we need a bigger boat, we might be running into trouble no one thought that you had any concerns in your investment portfolio or your type of deposits. You need a regulator to tell you that . Congressman, we looked at several things your Regulator Team missed it, and your Management Team missed it . Congressman, the capital ration that we had was exceptionally strong and art with whitney at the end of the year, we had 69 billion dollars worth of access, plus cash. I know the numbers, but you dont have any conversations with the regulators at the time, hey guys, we have 57 treasuries, [inaudible] Interest Rates are going up, we are losing billions of dollars, most of our deposits are beyond the fbis of the insurance, those conversations did not take place . Congressman, we were talking about Risk Management on a regular basis. So we looked at our Risk Appetite statement in the metrics, and if there were any concerns, we address them as quickly as we could. Okay, in november 22 Interest Rate risk simulations are not reliable. You received that notification from the feds, no alarms went off . Can you repeat that question . In november of 2022, the fed issued you a supervisory statement, and i quote, Interest Rate risk simulations are not reliable. Your bank. No . You reviewed in november of 22, and you did not receive a sky right rating, you received a high risk rating, and nothing was really done, that was november of 22 . The response that we provided to Interest Rate whiskey management and the quality Risk Management was throughout 2022 and into 2023. So we were working on managing the higher Interest Rates, making sure we had enough liquidity to support our clients and making sure that we were taking care of Interest Rates. I dont know what Business World that sounds reasonable, but it doesnt to me. Mr. Shea, im gonna move on. Signature bank collapsed, according to the f i d. C. Was due to poor management and that you did not need fd eye seize concerns about the response to addressing fdic supervisory recommendations. What say you to that . As chairman of the board, i believed that the bank was actively addressing regulatory i yield back. Gentleman yields. Miss pressley is recognized from providence. Thank you. You know, several of my colleagues said that characterized your time figure today as possibly being uncomfortable. I am really okay with that. Personally, i am good with your being uncomfortable. Because my constituents in the massachusetts seven were very uncomfortable when s v b collapsed. They were afraid in the face of uncertainty about the status of their mortgages, Tech Companies couldnt make payroll, Small Businesses were unable to proceed with payments. So they were very uncomfortable. So im quite fine with your being uncomfortable today. Sure enough, the ftc icy acted quickly to make depositors hole, today, appearing was Still Necessary because it is tragic, avoidable, sequence of events demands accountability. Mr. Becker, in your Opening Statement today, and in your response to questions that mirrors your testimony before the senate yesterday, lots of finger pointing, blaming, passing the buck. Blaming social media, a tegans, 2018 republican bill, which you lobbied to help pass. And even your own employees. Now, this question might feel a bit like we are off today, but here it is. And i want a yes or no answer, because, i dont have the patience for filibustering, and the American People deserve more than the niceties of a committee hearing. So, yes, cornell. Do you accept responsibility for the harm in damage caused by your actions across the Financial System and to my constituents in the massachusetts state, yes or no . Congresswoman, i accept responsibility for the decisions that were made at the time. Yes or no, do you accept responsibility . I accept responsibility for the decisions that were made, with the information that we had at the time he made those decisions. The banks failed on your watch, period. Between 2018 and 2023, Federal Reserves sent your bank 60 matters requiring attention, [inaudible] mris, you and highlighting the new building upon the questions that my colleagues across the aisle. Were you aware of these supervisory notices, yes, or no . Congresswoman, yes or no . The numbers yes or no, you are a smart man. I was aware of the regulatory findings. So svb was definitely aware of the notices and they repeatedly ignored this. They failed to address the obvious rift that were repeatedly pointed out to you, year after year after year. Blame social media, you say similar things have said the same thing, so it is not your fault for what happened, ultimately. Failure to address risk after 68 supervisory notices is absolutely unacceptable, yet, throughout the last five years, your pay skyrocketed and you continued with the benefits of mismanaging your that is why maybe you are as uncomfortably as you should be today because you are sitting on at 1. 5 Million Dollar bonus. Way to fill up. You received over nine point 9 million last year in compensation, as well as 1. 5 Million Dollar bonus in light of your tremendous failure to manage obvious risks. Do you think that you truly earned your salary and your bonus . Yes or no . Congresswoman, to clarify, the numbers that you are talking about, the incentives that were set up please dont tell me that you trust the board. That is a cop out. Yes or no. Do you, again, way to fail. Up i mean, that is just, consistent for so many reasons. But the answer is, no, you have naturally earned your salary or bonus, and that is why we need accountability. Because there are people that deserve accountability. That includes clawing back bonuses, investigating you for gross negligence, malpractice, and greed, the dangerous a regulation that you lobbied for instead and sent a strong message to bank ceos that risky behavior japanese our Financial System will have severe consequences. I yield back. Gentlelady yields, the gentleman from south carolina, mr. Timmins, recognized. Thank, you mister chairman. We currently have 32 trillion dollars of debt. Our deputy ratio is hundred 20 , the highest it has ever been. And yes, we have a debt ceiling fight running right up to the deadline, but mr. Congress spent 7 million of which five trillion was done mostly on party lines, but also the democrat majority not only spend money we dont have, but theyre central policies cause out of control inflation, which we can draw a direct line to the failure of your bank. Give or take some gross mismanagement on your part, the democrats seven trillion dollars in their spending over the last four years have caused inflation. While my clients across the aisle disagree with that possible relationship, but i think theyre the only ones still trying to defend their opportunistic government handout. I think your failed banks are the First Casualty of the democrats spending spree. And i think your banks are just beginning. I think all of your employees who know they have jobs will soon be joined by more hardworking americans and i guess lets turn back to the gross mismanagement issue. Mr. Becker, do you feel that recent reports written by the Federal Reserve California Department of financial protection and innovation for Fair Assessment where what happened before and up to when your bank was placed in the receivership . Congressman, the feedback that i think was in the g. A. O. Report is accurate in the sense that you are responsive to the regulatory feedback and were actively appreciating concerns that were brought up so i think we were very very attentive to the feedback we were receiving. But the feds report on your bank failure are lane with you in your senior Management Team. Can you please describe the organizational structure of your Risk Management Team Starting with you in the zero and on down from may 22 to january 2023. I will start, congressman, at the highest levels. We have the board of directors which is responsible for the overall governance of the institution. Weve risk a mittie that is responsible for the overset of the risk of the institution, that Risk Committee has oversight again over the risk of all of svb. We had oversight. We had several Risk Committees, management Risk Committees, one of which reported directly up to the risk we had what would be called as three lines of defense that we had internal audits we had independent which reported up to our Audit Committee we had a risk structure that reported upped the Risk Committee as you previously testified you dont have a chief risk officer at that time . We had a chief sauce for sir for the majority of 2022. But not in the last eight months prior to the banks closing . We have the chief risk officer that was overseeing Risk Management for the institution. Can you explain to me the concept of faithbased catch up what was that in svb . Safe space ketchups, theres been widely reported that your bank spent enormous amounts of time with your executives promoting safe space catchups basically diversity Equity Inclusion endeavor to make people feel welcome in the bank . Congressman, that does not ring a bell with me. I dont know what that would relate to. Can you estimate how many of your senior risk officers were also leaders in your company wide diversity Equity Inclusion program . Congressman i, dont know the answer to that question. It would appear that a lot of time was spent, your website, prior to it being shut down having enormous amounts of emphasis on that and it seems that there was a lot of time spent on things that do not cause banks to succeed and things that make people feel good and, i think that was part of the problem. Moving on. Some are proposing increased Capital Requirements, and when asked each of you these questions, would increase Capital Requirements have avoided your bank from failing, mr. Pecker . I cant comment on that because i dont know what the requirements would be in the structure if they were 50 higher, they were on a percent higher than the Previous Capital requirement, you know. I dont know the answer to that question, congressman. Mr. Shay, would increased Capital Requirements cause your bank not to . One deposit i spoke to on friday afternoon said, unless you have 1 of cash than you are worth every dollar that we have to move from the bank. And you . Similar, i would, say the Capital Requirements we have now are very strong and i think any change that might be considered should consider the impact to Regional Banks and Community Banks and be careful but not have a one side fits all because i grew up in a small town in wisconsin and i know the importance of Community Banks and you want to make sure that they can continue to provide the service and support the communities because they are so integral. Thank you, mister chairman, i yield back. The gentleman yields to the gentleman from nevada, mr. Horse burned, as now recognized. Thanks, i think the chairman of the Ranking Members for the hearing. I did have some very specific questions, though, again if you could respond with brevity. Mr. Becker, do you take any accountability for Silicon Valley banks failure, yes or no . Congressman, i was the ceo of the institution, so i am responsible for Silicon Valley bank. Mr. Roffler, do you taken responsibility for First Republic banks failure . As i said earlier, regardless of causes, i take responsibility for our clients and for our employees every day, in making sure that they are taken care of and supported. Mr. Shay, do you take any responsibility for Signature Banks failure. Mister chairman, i believe i filled my responsibilities responsibly. What is very troubling about each of your responses and sitting here is that the idea that your lack of governance and oversight and Miss Management has disrupted the entire Regional Bank ecosystem in our country. And, as a result, our committee, and other committees of jurisdiction, are now having to step in to figure out what we can do to help protect Small Businesses and other depositors to make sure that their lives are not further impacted. So it is mindboggling to me that you cant take full responsibility for your action. Do you agree with g. A. O. s statement that your bank failure has to do with the poor governance and on satisfactory Risk Management practices, yes or no, mr. Becker . Congressman, yes or no. I take ownership of the decisions that were made. Yes or no, do you agree with the g. A. O. s statement that it was poor governance and unsatisfactory Risk Management practices. Congressman, i take responsibility for that. That is not an answer. Mr. Shay, do you disagree with your banks failure had to do with the poor governance and unsatisfactory Risk Management practices . I cant speak for the regulators, i believe the reason for signatures closure was due to the Extraordinary Events that happened on that day. Mr. Roffler . Same question. Congressman, i dont believe the g. A. O. Report spoke to First Republic. Well, to be clear, g. A. O. s assessment clearly indicated that it was due to Miss Management of the two banks in particular. And i believe that that the bank fails due to misconduct and mismanagement, and executive should be held financially accountable. That is what the average person, the average worker, the average consumer has to deal with when they make decisions. So out of curiosity, mr. Becker, did you receive compensation package after your departure from Silicon Valley bank upon its failure, and if so, do you mind disclosing how much . After i was terminated march 12th, i did not receive a competition package. Mr. Roffler, did you receive a compensation package after your departure from First Republic bank for its failure, and if so, do you my disclosing how much . I have not received a compensation package following the closure of First Republic. Mr. Shea, same question . No. So let me ask a different question. Should it bad behavior or poor judgment or terrible managing the financially awarded . I think absolutely not. And while we continue to hear very concerning reports that executives are taking huge payouts, as banks fail, i am left to wonder, as many of my constituents are, if your compensations packages incentivizes this crisis in the first place. What is so frustrating to me, and a lot of my colleagues about all of this is that somehow that you feel as if you shouldnt be held accountable. Meanwhile, hardworking nevadans and americans across the country are held to the Higher Standards of accountability in the work that they do each and every day. If an ordinary american took out more money in their account than what was actually available than they would be charged an overdraft fee, if an ordinary american was one day late democratic card bill, they would be charged a late feat. Yet, when a Bank Executive poorly manages their bank which eventually fails, they are paid multi millions. This is what is wrong, this is whats broken, and it must be fixed. The gentlemans time is expired, the gentleman from south carolina, mr. Norment, is recognized. Mr. Becker, i think you earlier, you mentioned that youve been banking for 30 years. 12 of those a seal. Yes. Mr. Shay, how long have been in banking . How long have you been in the banking arena . Please put your mic on. I know you were director, but how long have youve been in the banking sector, how many years . Since about 30 years. 30 years. 30 or more years. Mr. Roffler, how long have you been involved with banking, been appointed as a banker . Ive been a First Republic employee for 13 years, and before, that i was with k e m g. So how long . 16 years. Okay. All of you have seen ups and downs in the market. Any of us, and im in the world state world, development world, mr. Becker, i find it hard to believe that this group from i think, 40 million up to 210 billion, i find it hard to believe that with the camel rings that you received in the warnings, that where there is an mou or variety, described in words, it is really what an mou is more of a conversation that, to not hedge your bets on the deposits, 94 were uninsured. How did you reach for that, how did you come to that conclusion . I know they were not returns, but 94 has been. How did you rationalize that . Congressman, that was our Business Model that, again my entire history, we had commercial clients. And technology and other clients. They tend to have higher levels of the deposits. That was our strategy. So you took their manatee, you put them in, assets and you took toward what i had, you had it 21 billion in securities. You sold it at 1. 8 billion dollar loss. Is that correct . On march 8th, we contemplated raising Additional Capital and selling are available for sale securities portfolios, as i articulated in my written testimony. Okay, and you mentioned that you all were without a risk officer for eight months. You have 2000, little over 2000 employees. Did you happen to have a credit analyst or a financial analyst or a front manager in that 2000 employee number . Congressman, to clarify, we had over 8000 employees. And we had roughly 1000 employees that passed the majority, or all, of their responsibilities to Risk Management. Nobody questioned what you are doing congressman, the investments that were made in 2021 that were made by our Liability Committee were invested in government securities. Okay. Wasnt a good decision, was it . Congressman, the decision that was made, i believe, was the best interest with the fact that they had at that time. Okay. Let me ask a question a little bit differently, and then i will come on the other side, is mentioned compensations. Were bonuses paid out in the last month of, or close to the time, that the feds took over but . 2022, incentive competition payments. For bonuses paid out . Bonuses instead of competition payments were determined, at the beginning of the year, and paid out on march, i believe, ninth. And that date was determined by our hr department, and our Financial Team earlier in the year. That date but you had the bonuses paid out after you had notices after the product that you had a head of silicon . Congressman, the findings that we, had the regulatory findings, we were responsive to where the bonuses paid out after you knew the bank, after you got notice the bank had some serious problems. Congressman, the feedback it is yes or no, at the end of the day, it is yes or no. We are all aware that you are in serious trouble, and were the bonuses paid out, and what amounts were paid out . Congressman, i respectfully disagree with the comment that, at that point, the congress we respectively. We were in healthy shape, it was the social media. Date wise, ive got ten seconds. Where the bank notices were put out, you are put out a notice that you had a problem with the bank, yes or no . Congressman, i dont yes or no. You know you did. Yield back. The witness can answer on the record in writing. The gentlewoman from michigan is now recognized. Thank, you so much. And i really appreciate my colleague from north carolina, because, i think this is going to help answer the question that you refused to answer, mr. Becker. If you look at the screen, you look at the slide there. It is pretty clear. Just so we are clear, because i know you are blaming social media. You are actually somebody that is blaming, you are not looking at me, mr. Becker. I am right here you are blaming social media for your mismanagement, and so forth. Which, to me, clearly looks like agreed. Because you are not stupid, you are just being greedy, because you wanted to get a pay out. I just, just so were clear, for the record. Were you aware of any material of non Public Information such as the potential capital rage before january 6th trading plan change that allowed you to sell over 3 million in stocks and Silicon Valley banking . When the plan was that, i was not aware. On january 15th, you changed a Corporate Trading plan, allowing a future self timeshare of the company, is that correct . On that date january 26th. I filed a plan that was signed out by our legal team. Okay, so, its yeah. Yeah. So in the question, were you aware of any material non Public Information such as the potential capital raid before january 6th Training Plan change that allowed you to sell over 3 million in your Silicon Valley bank stop . When that plane was set up, i was not aware of the plan to raise capital. So, mr. Pecker. Given the federal funds of rate increases more than 3 during 2022, why did your company unwind you from closing your firms from further rate increases. Because everybody wants no the answer to the why. Congressman, as mentioned earlier, the decisions around our Interest Rate hedges was made overseen by our Liability Committee okay so not your fault. Given Interest Rates continue to rise under your leadership, until the collapse, did you feel that terminating these were safe and sound practices . Congresswoman, it is mentioned, i was not involved in that nope. You didnt, and they paid you to not know any of this . Like, what did you do . As the league person, you were just, like i dont know, i dont know. Like, youve got millions of dollars to not know anything about your own bank . Given your incentive confrontation plan, mr. Becker, i mean the Financial Times you reported, the Interest Rate block fails were gaining 500 million for Silicon Valley bank in the first two quarters, of 2022 alone. Given your incentive competition plan and other forms of pay did you benefit from terminating these hedges against Interest Rates . Congresswoman, if i could clarify two points. Did you get money for it . Did you, benefit from that decision . Congresswoman, can i clarify the point you are making . Okay. Im listening. The hedges, when the hedges are changed, sold, to benefit, there is a benefit, potentially a maritimes over several years. That was not taken into income that period of time. And, secondly, our Compensation Committee would actually review anything that they believe was an anomaly outside of our standard practices and back that out, specifically, from instead of competition. But mr. Becker, do you think is selling the hedges to Interest Rate risk was selling the head just to Interest Rate risks is ultimately good for your depositors, shareholders, and other Financial Systems in the country as a whole . Do you think it was just good for you, or was it for the executives at Silicon Valley that benefit from the sail through your affected base competition . Becau, according to this timeline, it looked like you se it up so you all befit to walk away while every other bank inour Financial System was literally like in jeopardy. Congresswoman, our competition was set up for long term incentives. You know. You know you knew. You knew a couple years. You know, even if we increase regulation, they sent you notices, they met with you guys. What do you want them to do, come arrest you so you can respond to the fact that they saw that you guys were making really, really, terrible decisions. I mean, i love the g. A. O. Calls it pork government and mismanagement. You are also at your job, obviously, right . But at the end, you benefit while Small Business communities in the countrys hurt. You know what that looks like when i go back to my community and they are wondering why you cant call back, the fact that you benefited while everybody else suffered. I mean, do you care that it even wouldve collapsed the Financial System in our country with your greed . Gentlemans time has expired. Next, we will go to the gentleman from tennessee, mr. Ogles. He is recognized for five minutes. Thank, you mister chairman. Thank you all for being here. Im sure youre aware, or if youre not, we have the fdic in the Federal Reserve amongst others in here yesterday, and although they acknowledge that they probably could or should have done more, they point the finger at you. And your failings, and your management. So, mr. Becker, how forceful was the fed and emphasizing the heightened Interest Rate risk that resulted from the shift from the covid era is quantitative using to an environment with rapidly increasing Interest Rates . Congressman, the Federal Reserve was we covered a lot of different areas. So we are responsive to the feedback we received, including areas around the quantity, governance, controls, and the hem mria and m mra that we received with Interest Rates. The reason why bring that up, is because the start of the pandemic when svb collapsed, the fed didnt mention Interest Rate risks in any of its reports to congress. Were you aware that the Federal Reserve has suspended its remittances to the treasury last october because it took similar losses or your bank . I was not aware of that, congressman. I find it curious that the Federal Reserve, having experienced its own losses, did not recognize or realize the barn was on fire that created. Mr. Jean, mr. Loeffler, how forceful were they an emphasizing the Interest Rate risk as the priority and the supervise a shunt of your bank . Mr. Shay . I met with the regulators as chairman of the board, so i cant speak for their communications or other communications with the bank. Roffler . Maybe just a couple points. First of, all i think in the testimony written yesterday he commented about the failure of First Republic was largely contingent about and did not speak to management. I would add that i know several of comments were made, that miniature, that were confidential supervisor information it was made public. I do think that the committee, might be infinite information, and could make that request, i believe, of the fdic, and in california, which would try it to scripture as a pertains to First Republic. And, lastly, i would say not, as i mentioned earlier, wisconsin examinations. The fdic of california were gone premised regulators for six or seven years. They looked at a variety of topics, risks, Interest Rate risk when they provided supervisory recommendation, and so they did, mention work to exchange him in a timely manner. Mr. Becker, understand your comments really are, you talk about your Business Model which was i think compared to maybe Community Banks that risk your portfolio, if you will. But understanding there was a shifting Interest Rate environment. I was probably put upon hedging, how much exposure going to want to look at. , when i look at some of the wokeism that comes into svb, this is the perception, im not saying its fact, but andy khan, 101, when the government puts more money into the economy, you dont have to be an economist to understand that. You dont the experience in the market to know that there is going to be an offside risk, and in your bank, and again, the fed in the Federal Reserve are pointing the finger at you guys for saying that you shouldve been more, what is the main focus in part as you move forward . Congressman, two points. I get is important to note that the structure of our balance, the Loan Portfolio was 90 variable rate meetings. As rates went up, it wouldve benefited from higher rates. If i may, im at a time, i wanna thank you all for being here. If you wouldnt mind so getting your answer in writing, and, mister chairman, im out of time, i yield back, thank you. Thank, you gentlemen. Mister chair, i have a following inquiry . Ranking member is recognized. For the inquiry. Thank you very much. My understanding is that joining the subcommittee hearings are not commonly stated anywhere in the house our committee rules. And therefore, it can only happen with unanimous consent. Can you confirm that this is your understanding. It is. Thank you. I wish to shared with you that i have cleared my concern about this hearing happening at the subCommittee Level of because it is very important for all of the members of the committee to have the opportunity to participate in a hearing like this. And i want to be clear, and although i have miss held my objection this time, going forward, we will not hesitate to object at this kind of coordination does not occur in advance. Thank you, i yield back. Respond to the Ranking Member, i would say the chair in the Ranking Member both called for this hearing at march 29th, the first time the Federal Reserve in the fdic testified before the committee, in your opening remarks, the Ranking Member stated, we also need answers from the ceos, who not only ran these banks into the ground, but entrenched, enrich themselves, separately. Mister chair, that is not to rig. I asked for a hearing of the full committee. Not of the subCommittee Level, make that clear. Very good. Separately, i just remind the Ranking Members that a third wrote to the chairman, asking him to immediately schedule and invite the ceos in the svb signature, and First Republic, exact to testify, this hearing response to those requests, which was noticed last week, pursuing the committee rule. At the former Committee Level. And i would also just at that if there is concern, the full committee is now holding this hearing, there should be, because the chairman of the full committee, and the two subcommittees with the most experience in banking issues, and conducting oversight, that the Financial Institutions and the mock terry policy subcommittees, in the oversight investigation subcommittee were allowed to hold this hearing. So, in fact, the chairman of the subcommittee chairs of the congress, you wanted the bulk of the committees work to be done at the subCommittee Level. But that point, it is march 10th, both mr. Huizenga and i, the chairman, have sent eight letters to state and federal regulators as well as the ig. Mister chair, in a continuation of my complementary inquiry, you must admit, and im sure the chair would admit, that my request from holding this hearing was that the full Committee Level, and, of course, you are not implying that the expertise does not exist of the full Committee Level when you identify that it has been held at the subCommittee Level, because of their expertise. Mister chair, im finished with, it and i said to you that despite the fact i did not object this time, i will not allow it to happen again without objection. I yield back. Thank you for yielding back. I think conversation with chairman mccann tree would be valuable, and now we are going to recognize lady from texas, miss garcia. Thank you. Your yielding . No, she doesnt have to yield. As a matter of fact, my time, i am next to be recognized. And if the inquiry was just preliminary to my time to raise the questions. The Ranking Member is recognized for five minutes. Thank you, very much, mister chair. So. [inaudible] im interested in learning about all the factors, including bank mismanagement, lobbying efforts to deand other decisions that were made that put their customers and our nations Banking System in harms way. The leadership of these banks must be held accountable for running their thanks into the ground. Mr. Becker, it is a fact that your bank experienced rapid growth. Doubling in size from 2018 to 2020 and doubling in size again in 2021 alone and earlier today in questioning you suggested that the regulators never discussed the issue of Interest Rates with you, however, you later acknowledged that the bank was subject to investigation regarding its handling of Interest Rate risk and it was cited by the regulators as a problem. In fact, as early as 2018. The fed had begun citing your bank, for port mismanagement, including, Interest Rate risks. Four months before your bank failed, in november, of 2022, the fed for the issue and them are a, on Interest Rate risk. This mri would have been issued to the bank board. Is that correct . It wouldve been issued to the bank board congresswoman, the regulatory findings can you confirm you are on the bank board november 2022 . Yes, i was. Then you did have access to all of that information. Thank. You you would have personally received the mra and all other mras and wouldve had an understanding of Interest Rate risks and to say otherwise would i think, behind the whistle eating. So to me, it looks like you did know what was wrong. Its also concerned that after the earnings called on january 19th of this year, you mentioned a ten b dash five plan to sell approximately 12,451 shares of s v b and these chairs were sold two weeks before you drove the bank into the ground, and you received three point 6 million and other shareholders in svb received nothing when the bank failed. Mr. Banker. How is this not a golden parachute you secured for yourself as the bank was failing . Congresswoman, that sale was out of a ten b 51 plan that was issued right after our earnings release, reviewed by our legal team, and with my concurrence that it didnt have material non Public Information. When svb was taken over by the fdic on march 10th, i lost five times that i was required to hold thank you very much. We have a differing of opinion about it. Im going to have to mr. Shay. You ran one of the wellknown crypto banks after Silicon Valley bank failed, the market viewed your bank as the weakest link, and deposits quickly began to hold their money. Two days later, your bank closed. Now, according to the bank failure report, we have received. It seems like your bank did not even know what collateral it had available that would be eligible to play to the fed in order to retain was this the case . Why did you know what collateral you had . I thought we had collateral available, i thought we had collateral available that was in federal why did you not understand what assets your bank had to have is the question, and you did. Mr. Roffler . Jpmorgan chase inserted a billion in your bank after svb in Signature Bank failed at the rest of your bank. However, in a matter of weeks, your bank failed. One of that wouldve been sufficient to save the bank. That was 30 billion dollars that 11 thanks came together gave you. What did you do after that we were appreciative of those 11 banks that were helping to reinforce the confidence in the Regional Banking system which was an important part of the economy, unfortunately, First Republic was hit by the contagion of two failures that were occurring, and when the contagion spread to us, it is hard to recover confidence. And by the end of april, investor and depositor confidence had not returned, not for management efforts and not for everything we did, and, again, we had very open in very direct thank you, my time is over, but no amount of maneuver to save your bank. It was mismanagement that cause it to fail. I yield back. Ranking member yields back. I will now recognize myself for five minutes. Vice chair barr expressed a desire to have on the Federal Reserve forms analysis on bank mergers. This follows President Biden called for doj agencies responsible for banking update guidelines on a banking mergers to provide more robust grooming of the mergers. We strongly believe, and i trust, that it should be governed by the rule of law, not by the individual used. At any point in time. And at the relevant agency. So i am concerned that any change to the analysis that would depart from a widely excepted standard may not reflect actual changes in the competitive environment. A functioning basic system, muscle out stronger Regional Banks to be able to acquire those in a weaker position. Mr. Becker, do you believe the current hostile environment towards mergers played a role in your banks failure . Congressman, that is not an area of expertise that i have, so i dont know the answer to that question. Mr. Shea, would you like to respond to that . I dont think the regulatory merger policy was, or had anything to do with what happened to Signature Bank. I thought we were in a position to continue after the march 12th, march 13th. I thought we had a plan in place. I well reasoned, solid plan in place that wouldve brought Signature Bank exist today. It continues to serve its customers without any merger from anyone. Very good, november 11th wall street journal article explain at length Interest Rate risks presented by the Banking System by the feds inflation fighting rapid increase and Interest Rates, kind of an article that has been referred to hundreds of times now on this committee. Silicon valley bank was mentioned as a particular bank, without a september 30th to november 2022, a market value that was helped and maturity bonds, just lightly involved the value of this double equity. So, clearly, regulators should have been becoming aware of the risks surrounding Silicon Valley banks, so back to you, mr. Becker. I think if the uninsured depositors had not forced the bank to close with this many rush, how much longer do you believe the regulators would have allowed Silicon Valley to continue before intervening at all . Congressman, i dont know what the regulars would have done. I cant speak for them. Let me ask in a little bit of a different way. Were you working in concert with them with the regulators, and were they back and forth with the regulators that wouldve laid out the case that there are some serious issues relating to Silicon Valley bank. In my written testimony, theyre very sponsor the regulatory feedback. Of the state the issues with svb were pretty well known in the days leading up to the failure, right. However, signatures failure came as a surprise announcement. So, to mr. Shea, what point silica to you that Signature Bank could not last without some type of intervention . I believe that they had Signature Bank on friday was sufficiently capitalized, it was well salvaged, well diversified, it had a Strong Security portfolio, and it had 29 billion dollars pledged at the federal normal bank in Federal Reserve. I fully expect Signature Bank to continue on, and i fully thought that the plan that was presented for finance, the plan that was protected for that with collateral, and Signature Bank, would have allowed it to continue opened successfully on monday, and be still serving its customers, its middle market customers, its customers, today. I will yield back my time. And at this time, recognize the gentleman from texas, miss garcia. Five minutes. Thank, you mister chair. Thank you to the Witnesses Today. I know we have been talking about trying to have the sharon democrat system in place constantly been asking republicans to bring you down here, and im glad youre here, and im glad you are cooperating and are here with us today. Because it is time for accountability. Republicans have been pointing fingers at regulators, but we finally have a chance now to visit with you about your internal workings and your leadership on this bank. First of all, i want to get into some lobbying questions here. Mr. Becker, in 2015, you had Lobby Congress to raise the that were considered systematically important. Years later, in 2018, the former Vice President had signed s. 2155, the economic regulatory relief and Consumer Protection act into law, which raised the threshold from 200 and 50 to 250 billion, an increase from the previous 50 billion. By the time that Silicon Valley bank had just reached 50 billion in assets, it quickly grew so that, by 2022, it had been stated earlier by the bank owed more than 200 billion in assets. The passage of this lying in wait terms regulator implemented the law, reduced stress testing liquidity and other requirements , was that your intended goal when you urged congress to go against the plans for Regional Banks . Or is it just coincidence that it was Regional Banks like yours that failed in rapid succession earlier this year. Mr. Khan s congresswoman, the written statement that i provided in 2015 was focused on tailored regulation. And what we wanted to do was empowered the regulators, make the decisions about risk and be able to then tell out regulations based on their assessment of the risk profile. So we did. So you dont think it was just a coincidence if this happened to help your bank and your bank grew as a result of the changing regulations . Silicon valley bank in 2015 was one of many banks and other institutions and organizations that were talking about our galatians. Okay. Mystery lets go and talk about First Republican banks. You said significance under your leadership, in 2018 First Republicans banned 370,000 in lobbying. This was some of the highest lobbying spending in the banks history. Do you recall what congressional business a legislation has been for 2018 . Thank, you congresswoman. I was not the ceo at the, time i was not the. Bank there were three topics that came to mind. And one is what you referenced before. After 155. Theres a round tax deductibility around noble ending. Contributions to Students Loan for giving us for Student Loan Repayment plans. Were your pay lobbies urging congress to rollback the enhanced provincial standards for banks . I believe they were speaking with congress about the royals as one of the talents mentioned. As i mentioned, i was not the ceo. All of the communication. Were you at the bank it . All i. Was yes. We are not privy to discussions about the lobbying effort . I, always know. It seems to me that you are a lobbying for the trainers amaya resulted in some of the failures. Thank you for that response. Now, mr. Becker, if it reserve has a huge several advices in silicon bank, including those memories and immediate attention, mri a. She typically gets her to be more judicious. Mr. Bakr, when you snowbank take this mornings Federal Reserve seriously . Congresswoman, i can assure you that we took all regulatory findings seriously, regardless of whether they were and marias armor i is. You might notice that she actually said many times you all quote responded it would say that it would take a while to fix a problem. What is your response to that . There are now says you all took your time about congresswoman, it depends on what regulatory content it would be. Some of the matters around liquidity were handled very quickly. Others took longer. The gentlemans time has expired. Gentleman from texas de la cruz now recognizes. Thank, you chairman barr. For holding this joint hearing today. It is important for all of us to talk about what happened, what kind of oversight needs to be done moving forward what led up to these things . How the responders and regulators respondents. With that sense, or like to thank the witnesses for coming today. And i want to tell you a little bit about my district. Im from south texas its largely a hispanic district. One of the most hispanic districts in the entire nation. We have a large Rural Community that really depends on regional and small banks. Our colleague banks in my area in this was happening they were worried about bearing the consequences of your Bank Failures. What that may mean for them. In the future. Without paying sides, our friends on the other side of the aisle will have higher Capital Requirements and increased regulations, due to your Bank Failures. What i would like to know from each of you is, do you think that increased regulation and or increased capital would have prevented this crisis . I will start with, you mr. Becker. Congresswoman as i like it in my written testimony, we are here today from my standpoint because of a series of unprecedented events. As far as one of the rules and regulations that could have prevented at, i do not have the answer to that. But im hoping that my testimony other testimony will help us get there. Signature bank was well capitalized, well diversified, and had a plan to go forward. And i dearly where that happened, because wouldve been here today. In response to your question, on that afternoon those few hours afternoon in the late afternoon, on friday, the depositors who i spoke to you simply wanted to get their money in the bank to fail banks. I did not care, there was a one in 1 million chance. They do not care if there was a one in 10 million chance. This was their family, money their family business, their way to make payroll. It could not take any chance of not being in a too big to fail thank. They would like a p morgan, they will not let jpmorgan fail. They will say citibank. I dont know what regulation, i dont know thank you for the, question congresswoman. I want to be very clear that i cant speak to what has happened. At a couple banks here with us today. What i can say is that what happened that First Republic was not mismanagement. It was contagion. And if you think towards the regulatory side of that, when contagion hit is very hard to regulate and call for greater capital and greater you quality. As i said earlier, we had very strong relationships with our regulators. We share everything all the time. We had zero when the contagion moves towards First Republic. So i think to your question, it is very important for the community that is sir to have appropriate regulations to keep them safe and sound which allow them to serve their clients. Each and every day. That means that giving your expertise in banking, how do you think smaller Financial Institutions and Community Banks would be able to cope with the increased Regulatory Burden . I think it is a great question and not one i probably have a great answer for. I think that policy makers and regulators invites content engagement. Thats probably the best which try to do that and hopefully those banks will engage in that discussion. Thank you, mr. I would defer the banks to mr. Becker. I would agree that something this committee can Pay Attention to. Thank you. Im gonna ask really quickly because of what we saw happen, do and you will have any suggestions for congress on how to address these technologies which we talked about for so many hours now . Can we do Something Different on the social media site . Or address Something Different . What they like to take it . I yield back. The time has expired. Gentleman from california, mrs. Kim is now recognized. Thank, you chairman. I want to thank the Ranking Members of the committee for having us do a subcommittee hearing. Census vps failure, our committee has been laser focused on getting complete information, and helping to prevent similar Bank Failures from occurring in the future. There were two main points that stands out from the postmortem reports. And that is bank mismanagement, and supervisory failure. Mr. Backer, i agree with you that the Treasury Department missed the mark by describing inflation as a transitory risk. Im surprised you decided to drop most of the Interest Rates by may 2022. And this is after the fed to do increase rates in march 2022, and svb by then we already know we had 31 supervisor or resomethings and a trip risk for most of last year in 2022. Mr. , backward yesterday you also mentioned specific decisions about where executed by the Treasury Team. But ask ceo, did you have the final say on this decision was executed by svb Treasury Team . Congresswoman, the decision on the hedges i was not privy to. They would not have come to me for approval. The journal, so the reduced hedges to 15. 3 billion dollars just a year earlier. Congresswoman, as i mentioned, i was not part of the Liability Committee. And i have every reason to believe they made the best decision they could with the information they had at that time. Do you believe, than not having a crm playing a role in this decision, to drop the hodges . The best of my, knowledge i do not believe so. Mr. Record, in early 2023, march of 2023, you sold your available for sale to 1. 8 billion dollars launched. Did not have an immediate need for liquidity, and they say how to negative impact on your regulatory capital. So what do you make that decision . Congressman, that decision was made in consultation with our board of directors, and outside advisers. We believed it was the best decision for our clients. And for our shareholders. For those to go into effect, the same Investment Banking firm that was advising an underwriting your capital raid, didnt seem like a conflict of interest . How would you ensure that you receive the best possible price for those . Congressman, Goldman Sachs was our adviser on our capital raise. The decision to all timidly sell the portfolio to Goldman Sachs was a decision that was reviewed with the board of director of the special committee of the board. My mom, are they put in place a structure that would be a benefit, so sure that we get the best rice we could. And validate that in the market. Were gonna move. On let me ask you, the unprecedented speed and which in the virtual era is pushing our committee to rethink the rules, regulations, and the role of the feds as a lender of last years rewards. It has been reported that you are from one of the banks these both the 13 three facility and discount window. These lenders of last resorts meet your liquidity in march. And in your view, what couldve been improved . Thank you for the question, congresswoman. Yes, beginning on march 10th we began to engage with the Federal Reserve bank of San Francisco and also the federal bank. We previously pledged collateral with both of those institutions. We can borrow from. And during the weekend, when they contagion spread to us on that friday, we continue to prepare that weekend and actually the Federal Reserve bank worked with us to ensure our collateral was pledged and we could appropriately access it. And that monday, we accessed it with no challenge. Bank. You owe me to come back, you mr. Record. How many years did you serve on the board of directors at San Francisco . I believe it was roughly for a little more than four years. At the border directors to you at any point have any input on the San Francisco iona station clipping us v b . I did not. But you walk us through the role that you do as the board of directors at the San Francisco the gentleladys time has expired, and the witness can submit an answer in writing to that question. I would like to thank your first panel of witnesses for their testimony today, without objection all members will have legislation with additional questions, these witnesses to the chair afforded with the response and each of you please responding as promptly as you are able. The committee will take a brief reset and let the first panel go. And seek the second panel, that these witnesses are now dismissed. The committee will stand in recess. Taking a break from the senate Financial Services committee about the recent failures of Silicon Valley bank and i know a person panel of Witnesses Today we are welcoming the honorable Adrienne Harris of the near department of Financial Services. And quick to, you curate, Financial Connections and innovation. We think each of you for taking the time to be here, and were gonna be moving right into your testimony. There will not be any Opening Statements. You will each be recognized for nine minutes. Thank you, chairman and barr, Ranking Member foster and. Green and members of the subcommittee. I majored, harris superintendent of the Financial Services. I thank you for inviting me to this hearing. On sunday march 12th, 2023, which are bank sailed after experiencing a propulsive run on deposits on friday, march 10th. The runners instigated by the self liquidation on march 8th, and the failure of Silicon Valley bank on march 10th, following unprecedented around on the deposits. In order to avoid a midday monday shut down across the Banking System on the evening of sunday march 12th, so they have the position of staterun appointed before its failure on march 12th, theyve had regular tory report of examination. Despite orders from regulators, they banquets slow to remediate supervisor recommendations, many issued and abide by the regulators remain unresolved when the bank fails. Signatures and ability to remediate the outstanding liquidity management issues, undoubtedly contribute to its collapse. However, the immediate clause of the bank failure was unprecedented run on deposits, integrated by the self liquidation of silver gate and the subsequent failure of svb. On friday, march 10th, signature experienced a runoff of 18. 6 billion dollars in deposits in a matter of hours. Reducing the banks deposit bank by 20 . Throughout the day, friday and into the, night regulators worked closely with each other in signatures to find the quantity to satisfy customer withdraw requests. After avoiding a default on friday, regulators have time for the we can to address the signature conditions income to reconsider view as to whether the bank should open safely on monday. The office had won that weekend. To preserve the safety and soundness of the Banking System. Three pass word and fight for the, banking order of preference. The first was to find a way to open a safe and sound manner on monday, and continue as a steeple institution. The second was to find a purchaser for the, rank on an open bank basis. And, third the effects on the fdic would work in parallel to prepare for the last resort scenario, taking possession of the bank and appointing fbi see as a receiver. Irregular dispense the weekend collecting and evaluating information for a signature, an order to make a data driven decision. Some interesting ability to provide reliable data and incredible luck with a stern if you talk renaissance at monroe the lead vehicles to take possession of the bank can immediately appoint the fdics receiver. At the time, the f asked took profession, the bank had four point 27 billion dollars available for the quickly by monday. Morning to cover known withdrawals ranging from seven point 47. 9 billion. These withdrawal estimates would not include additional unknown withdrawals that could even be anticipate on monday in light of market decisions. Taking possession of the bank was the option of last resort to avoid a disorderly midday monday shut down and stop a further panic incantation across the broader break. If the offensive are guilty of potential institutions are safe and sound. But the department is instituted heightened monitoring banks with higher risk profiles. And is implementing recommendations to modernize the provision of the global Financial System. Thank, you and i look forward to your question. Thank, you yield back the rest of your time. Should have added this, with a very niche of your written statements will be made part of our permanent records. Thank, you superintendent harris. With, that commissioner he would, you are recognized for five minutes as well. Chairman, Ranking Member, and members of the committee, we appreciate the opportunity to testify on behalf of the California Department of financial protection and innovation. My name is pelosi hewitt. Ive served as commissioner since december 2021. Building on over 100 years of state regulation. They grant the permit was very structured in 2020. Strengthening californias financial oversight. The fbi has broad authority, with access to the Financial Sector in california. Including banks and Credit Unions. Regulation supervision and enforcement, the fbis safety and soundness for consumer production. We study ranks, like Silicon Valley bank, are regulated by both state and federal regulators. State regulators play a vital role in maintaining the strength of the dual Banking System. Particularly for local banks. That serve Diverse Communities throughout the country. State regulators supervise almost 80 of all the banks in the u. S. Which can place to more than 3000, 800 banks. And 8. 5 trillion in accents. This includes overseeing two thirds of agricultural lending, and half of Small Business lending. Localized supervision equipped state regulators to better understand the unique demands forced by banks and local communities. And in california, the fbi supervises 99 banks with an average of approximately four billion. Nearly half of one billion in assets. Nine and four banks are over ten billion. The Department Offers supervisor hundreds and 13 Credit Unions with an average size of 1. 4 billion. For nearly 40, years Silicon Valley bank was an Important Service provider for californias economy. A Life Sciences and Health Care Sector nonprofits, and Small Businesses. On march 8th, the bank announced the loss of 1. 8 billion and the capital roth. There initiated withdraws of 14 billion dollars. Approximately 25 of global deposits. Over 24 hour period. Causing an unprecedented run on the bank. The end of march 9th, they had approximately 958 million. We determined that the bank was and on march 10th, the fbi took possession of the bank. Appointed the fbi c as receiver. They examines the banking coordination with the primary federal regulators. And a reserve bank. Federal examiners led an examination of Silicon Valley, with the federal regulations related to a standard. In the review of s v b, luckily and Interest Rates. The department and lacked insurance about the liquidity in 2021. An Interest Rate beginning in 2022. They provide time to remediate, and the thomas were not acceptable. They published an internal review of the supervision, and the closure of Silicon Valley bank. That review in the recent failure of First Republic Bank Highlights the need to make changes to remote safety and soundness of safe charter banks. And the fbi is committed to working with federal regulators, developing a stronger and more effective systems to promptly remediate efficiencies and better allocate running. Terrific the fbi will increase its focus on bank levels of unrestored deposits in require banks to evaluate to the count for murdering risk. Posed by Technology Enabled activity. Such as social media and realtime withdrawal. I look forward to working with congress, our federal regulatory partners, and californias state legislature. To implement changes that strengthen our Financial System. Thank you very much. Thank, you commissioner. Here is i appreciate. That will now turn to member questions know or who denies myself for five minutes. I do want to thank you both for being here this is an important part of the examination that we have. Commissioner he would, you say that the Federal Reserve is a leading regulator an Interest Rate risks due to expertise. Your november 2022 supervisory letter said the siv peas risk simulation was not reliable. Did you what they find identify concerns with Interest Rate risk prior to november of 2022 . I was at the first time that it was officially raised . The quickly rests reidentify in 2021 in the letter and may 31st of 2022 corporate governments efficiencies where identified as well and has noted in november. In august 2022 food there were numerous mris and mris noted, and in addition in Silicon Valley bank was notified that and would be initiated. Just to be clear, in november of 21 you are saying that there was official notification from the Federal Reserve about Interest Rate Risk Mitigation. It was a quality Risk Management that we found to be not necessarily tied to the Interest Rate. The Interest Rates were not identified until the elephant, be the large form being organization, began their review. And that was noted in the november 2022 letter. I will know that in testimony earlier today, the former head of s v said that there has not any of the Interest Rates risks brought up officially or informally by the fed until the november 2022. During the 2021 in 2022 examination cycle, the fbi collaborative was federers ours in San Francisco intended the 16 targeted exams. Aside from the horizontal reviews, the fbi did not participate in the liquidity review. Capital. Review and model Risk Management review. I want to state, im a former state legislator myself. Why would the state regulator want to participate in a liquidity review and one of its largest state to order berks . When he had two examiners that were assigned. Fulltime. But there was based on fact that the federal regulators and 20 highly trained examiners. At that, time were in the best decision. To induct the review. We work in consensus and collaboration, with the results. That was your decision. Or did the feds say, hey we have the expertise, let us handle this . I once the decision made by the fbi. And, then you have the supervisory letter in august of 2022, the letter explained regulators plan to initiate and informal enforcement action and they form of memorandums understanding, on the menu with the bank in the march of 2023. Theyre still in the drafting process. We have bens role in drafting the arrow you, primarily the fed or youre driving that mou, and i have been a dry form for six months. We work in collaboration with our federal partners in the drafting of the mou. There was a consensus decision that was made by the f b eye, and working with our federal partners, huawei for the mou, until after the Liquidity Risk and horizontal review was completed. We could have and should have, looking back in hindsight, issued an mou in august of 2022. When we noted numerous consistencies. And indicated that there were numerous arise, mri is open. My time has expired. We will be following up in writing. Want to unpack more of this particular issue, as to why that was not done. With that, gentlemen, there is a minority Ranking Member from texas. Mr. Green is recognized for five minutes. Thank, you mister chairman. I would like to make an observation. Obviously, a part of my time, but as you know ive been very critical of not having in the balance on our panel. Usually, we have white men. I want to compliment you today. We have two women on the panel. I think if im going to be critically inappropriate i should also be complimentary. If the gentleman does not mind making an observation, i will suspend the clock in our last few oh and i hearings. We did have African American women and three hispanics, the democrat witness was actually a white female. You professor. So we have been trying very hard to make sure that we have got everybody having a voice at that table. Yield back. Thank you very much. I mean something to, given my history in the history of my ancestors. So much to be said. Lets go back to the business at hand. Superintendent harris, you indicate on page five what it verbally as well. Nothing management we are talking about signature when acknowledging regulatory findings, does not he the regulators orders. The bank was slow to remediate. The recommendation, but many issues identified by the regulators remain unresolved when the bank failed. You go on in the case the immediate calls of the banks failure was an unprecedented positive instigated by self liquidation awe of the bank, and a subsequent failure of svb. This indication that the supervisory mediation identify remains unresolved when the bank failed, i do think that this is very important. There is a belief by some, a belief that some supervisors and regulators, they would not have fear enough with their punishment. And that this lack of is the reason that the banks failed to do that which they should have done. Which, when you comment on this please . I dont want to pull you into a real tug of war. I will ask if you could, to give a commentary. Thank you so much, congressman. Although the immediate causes of the failure was a propulsive run on the selfregulation of silver gate and then the failure of svb, but is no excuse for the bank not remediating those in a timely fashion. I will say is that in addition to Bank Management being more responsive and more accountable, we also need regulators to act more quickly. And in my seat 19 months ago we were to update our supervisory procedures, and of course in light of these failures make sure that the feedback loop disaster was tighter, so that the examination process can take place more quickly. It can be given to Bank Management. We are reviewing to make sure that recidivist activity escalates more quickly that we can take more prompt action. We have had the government go to the office, as well as the provincial regulators. To indicate that the end of the day, li failure of the bank relies with that the regulators dont create circumstances that cause failures. I see you are nodding but is that a fair statement . I think it is a fair statement. But as flooding all the reports, i think there is that regulators can have good. Well i agree we can have improvements. But as you know, it is the bank that has a liability. Yep. The regulators do not have liability. And the banks have the duty and the responsibility in the obligation to have a good Risk Management team. And banks in the Analysis Shows its failure. Lets go on to the next brilliant thing that we have. Note that i said next. Both are brilliant. Tell me quickly. Do you believe that the banks failure is due to the regulators not being i think there were many factors, not just one, the length of this bank failure. The time has expired, sorry. We will have to have you respond to the rest of that for the record, in writing. So thank you for, that appreciate thats. Would that gentlemen, the chairman of the Financial Institution, except mr. Bob of kentucky, is recognized for five minutes. Thank you, mister chairman. Superintendent harris was Signature Bank well capitalize on the time of this failure . They were well capitalized. But they had inadequate liquidity mid risk when joint and other Risk Management practices. Did your agency issue an mri or an mri a, or to your knowledge to the fbi sea issuing a moron mri related to Signature Capital adequacy . Yes, sir. And of course our m. I. A. Supervise recommendations went to the and fbi together. Were any of those mris relates to capital . Yes they were. Explain. That it was well capitalized, why if you matter requiring attention . Because there is always room for improvement in better Risk Management practices. Let me ask a question this way. Did the fdic ever raise concerns about signatures capital adequacy . Never, yes. I believe we both get. What was inadequate about the those capitals . Did they not satisfy regulatory requirements . The concerns centered around the types of capital, the ability of the bank to find appropriate liquidity, to manage that risk. Given the risk for profit of the bank over a short period of time. What increase, would increase capital of saint signature . Hard to speculate. Congressman, i think there is Risk Management on liquidity Risk Management. Interest rate Risk Management. Governments and other factors. Not as much of a capital adequacy issue as these other issues, liquidity and Interest Rates and stability . It is hard to disentangle, them but yes. I think liquidity let me ask, you he will, it was as vp well capitalized . At the time of his, failure it was insolvent. Prior to the axle failure before the, run was it will capitalize . Before the run, before that occurred, it was considered in traditional terms well capitalized. In the prior four years, Silicon Valley banks capital ratio is similar or higher to the average of secure banks. Well above the applicable clap bill threshold set by regulators. What increased Capital Requirements have saved Silicon Valley bank . Given the 42 billion dollar run on deposits in two hours . Once the run began, i dont think anything could have addressed it. Here is a. Point these Bank Failures did not involve a capital adequacy issue. Is there any evidence that these Bank Failures, that these banks failed, due to inadequate levels of capital . I think the answer to that is no. If the fed or the fdic raise concerns, would you, as you all did, joint exam related to asset liability . On the Balance Sheet of these banks . That was one of the areas with several ports but not to the extent of liquidity and other Risk Management issues. Commissioner hewitt, defense recent reports on Silicon Valley Bank Failures on Senior Management at the bank, the feds say the Silicon Valley bank had 31 addressed safety and supervisory warnings. Do, understanding however, the senior Management Team acknowledged each outstanding morning and set forth plants for remedial action. This hewitt, how did your supervisor never allow us as a bank to reach 31 unaddressed warnings to begin with . Why didnt you or the fed ever stop and think, with all these, warnings that there is clearly a larger issue here . We operated in consensus with our federal partners. And it was unacceptable that we did not operates in a timely manner. However, most of our banks are smaller Community Banks, and our state Bank Regulators, they work with our smaller Community Banks. To give them time to remediate their deficiencies. I think that may provide your agency with an excuse. Swelling of the San Francisco fat. As, harris from the question to you. Following the clash of svb, signature had to top the federal bank of new york. Youre taking the report because they didnt have the collateral to pledge new york. That, over and has been reported that signature had additional Borrowing Capacity with the new york federal Home Loan Bank. When they attempted transfer that collateral to the new york fed refused to accept it, could you please elaborate . We had some operational challenges that we saw more in writing. But in short, we had to have the federal home interest in the collateral that have been pledged to the fed honor to get some liquidity for the bank on the friday. I yield back. Gentlemen, the time has expired. With that, said the gentleman from california mr. Sherman is now recognized for five minutes. I want to focus on this idea that these banks were well capitalized. There are a lot of countries around the world to have a way or terms zombie banks. They are under capitalized. In terms of what their assets are really worth. But their Bank Regulators and for this or that political reason around the country, they say theyre well capitalized by allowing them to list those assets on their Balance Sheet as far more than they are worth. I fear that we do the same here in our country, although it is a little less obvious. You can say that Silicon Valley bank was well capitalized. And it is to say, its assets were with a lot more than its liability. But the fact is, when it was taken over, ftas he had to pay 20 billion dollars to somebody to take it over. So in fact,. The liability exceed the assets by a least 20 billion dollars. Another two and a half billion and another 13 for First Republic. All of them underwater. Last its not worth. And the reason for that, in this case, was that with Interest Rates going up, the value of your loan or your bond goes down. That is Interest Rate risk, and we have a system of disguising that. At the regulatory level and at the Bank Financial accounting level. Miss harris, if you have a bank that says it has got 20 billion dollars in capital, which you actually look a there securities that they bought, they have lost 19 billion dollars. In todays market, they are worth 19 billion dollars less. Is that way well capitalized bank . It was on a bank barely holding on with 20 billion in capital, but they love 19 billion . Or revisiting the accounting rules and, assumptions it is well warranted in the case. What we have seen in recent months. Now, i said this to mr. Barr when he was here. You folks have come up with advice in the bank. But then they didnt take it. I used to be a business consultants, and i would give advice and they would take it. And they would pay me, and i was happy. When you saw these problems how can you do not require a bank . To use credit default swaps and ensure the position or to sell their long term security and by short term security, why would allowed to ignore your advice . I will first ask miscue it. First, where gallaghers responsibility is to promote safety and soundness. And trying to find efficiencies for Board Management. It is Board Management responsibility to operate that way. When they dont take your advice, do you pull the plug or just shrug your shoulders and walk away . When they dont take your advice we should move aggressively and swiftly with increased measures, even if it means a cease and desist or Consent Decree. I want to focus on one of the things. We are the only country in the world that believes that with this bizarre system overlapping regulatory authority. You can choose to be fed, you can go with the occ. And lets say, miss harris, your institution was tough on banks. Couldnt they escape you by either chartering themselves in new jersey or going with fed regulation . And if several banks did that, you would lose revenue and you would have fewer people to audit your institution would decline. So is that what happens to a Bank Regulator who is tougher than the fed regulators or the regulators in adjoining space . I will tell you, we dont take those things into account. We addressed risks to our institutions as we see fit whether its Bank Insurance companies or the virtual current currency companies we regulate. The rules are the rules. I would hope, so but in this, case the rules we dont force the solution. Miss hewitt, you describe the folks you audit as being in the 1 to 2 billion dollar range Community Banks. Community Credit Unions. Does it make sense to like the Silicon Valley bank . The gentlemans time has responded we will respond on the record. The gentleman from missouri, mr. Luke meier, who is also the chair of the subcommittee on national chair. Is recognized for five. Minutes thank you mister chairman. We lets start with harris. When banks are misbehaving. In order to make a point you have to do things more aggressively. Do you agree with that . Yes i do. That begs the question, in the g. A. O. Report with regards to this. It just came out. The f t i see, with regards to Signature Bank, is the statement that the before the banks failure. The Signature Banks management will report the fdic that mitigated issue, only for the fdic to find the issue unresolved during transaction testing. They called the fdic to were you aware of this . Absolutely. We regulated the banks rightly, and as you will, note it is the code supervisor on they saw what were you not doing to force the action that the fdic was doing nothing . And you agree that something needs to be done. Why were you not doing something to be margaret sieve if you agree with the statement here to get things done . Since ive come into my feet over the last 19 months, weve worked to update our protocol my question is, why did you do something . Sir, when i came at my seat here in the middle of an exam report. But surely we would have taken swifter exemption had the exam been able to conclude. The middle of an exam report . That doesnt answer my question either. Why didnt you take action . When you have somebody not doing the job you need to be doing her job. Why didnt you take marcus of action . As i noted we were in the middle of an exam and was it we identify the issue Bank Management . You identify the issue. But you have to do something. But it i agree, certainly are working to escalate issues and swift action. So you didnt do anything about it. So you guys are incompetent at managing the bank. Thats the problem. I know what my job is. You guys did not do yours. That is the bottom line. Miss harris, industry risk is a real problem. And a lot of the banks are upside down. Now youve got a lot of problems. His Federal Reserve is losing money because hes got himself upside down. Did the fed ever discuss with you the potential shortage due to rent hikes with the two banks in california . Discuss with me or discuss with my colleague from california . Matcha. Shes from california, right . Yeah. You oversaw those two banks . The fdic, the Federal Reserve, did they discuss with you the problems that the two banks presented . The Federal Reserve did discuss that there was deficiencies in terms of the review of Silicon Valley banks risks due to the rising Interest Rate. And that their simulation were unreliable and they also discussed it with Silicon Valley bank. The management in november of 2022. They offer to work with you in conjunction to do something with this . To force action by the bank to take action . They were going to take some action along with us, and they Silicon Valley Bank Management was informed . As a result of their failure in this area, and their lack of sensitivity to industry risk. And mou was going to be issued but the bank run occurred. Im sorry to interrupt, one more issue i want to talk to you about. I think this is very teachable moment for all of you. The social media helped drive the situation . This morning, the gentleman indicated how long it took for them to lose all these dollars out of the bank. Social media has really turned our banking world upside down with how quickly things can happen. I think that theres a National Security risk from the chinese watching whats going on. We are self imploding. Im very concerned about. Do you have the same concerns . Yes sir. We yes, definitely. We want to continue to work with you to be able to try to address this. This is that it was challenge that this industry has. We are around the corner. We gotta make sure that we need to transfer this safely. Thank you very much. Gentlemen, time has expired. Gentleman from ohio, miss beaty is recognized for five minutes. Thank you mister chairman and thank you members and thank you to our witnesses here today. Superintendent harris, earlier today on panel one we had mr. Shea here, cofounder of Signature Bank. He indicated that he didnt think it was necessary for the regulators to close Signature Bank. Can you address his claim and explain the decision to close the bank that we absolutely, maam, under my authority at the 606 of new york, i have the authority to take possession of the bank if its operating in a unsafe or unsound myth. If its authorizing. In this case we need the bank had a four billion dollar shortfall at the time we took it over. It had an inability to demonstrate a credible liquidity strategy and ill give you an example. It is on saturday afternoon they said to us they had 5. 1 billion dollars in pledgeable securities, 35 minutes later they revised estimate down to 900 million. The regulator implacability to get a clear and look credible like one of the plan from the bank made it clear that they would not be able to open on monday. I will ask you the question we asked, to whose fault is this . And i want to follow but my colleagues question. Mr. Becker was the only one who said we or halfway acknowledged and took responsibility as being the president. Do you think it was mr. Sheas fault . Do you think it was your fault . I think primarily Bank Management failed with the Risk Management. And who is Bank Management . Mr. Shea and his colleagues who were running the bank on the executive level and the ball. I think there are areas for regulators to improve as well. Let me go to my next question. I will ask both of you. I will start with you, commissioner. Im concerned that without reform that we may continue to see an outflow of Bank Deposits await from Smaller Banks and into the nations largest bank. Community banks issued will be the backbone of our local communities. We saw how they pulled through to support communities during the pandemic. By ensuring that Small Businesses could get access to paycheck protection plans or pcp. We had some difficulties as youll recall. We had to come back, many of us especially on the side of the aisle had to make sure that we were dealing with Small Businesses. So heres where im. Going there 193 Community Banks in ohio. That is my state district. With a combined 154 billion dollars in assets. Almost 80 of these banks have been in business for over 100 years. And for comparison, Silicon Valley bank had over 212 billion in assets. Do you share my concerns of how these Community Banks in your state were gonna do after the aftermath of the recent bank failure . To have any recommendations . First and foremost, regardless of what federal rule legislatures is introduced in past, there must be emphasis postpone supporting our Community Banks. Our Community Bank is on the front lines, providing lending to our Small Businesses which are the engine of our country. Our Community Banks are the entities that are providing lending to our most underserved, whether they be in inter cities or moral america. Whatever solution we discuss or collaborate with together, our Community Bank should not bear the burden. And Everything Possible should be done to support them. Okay, ill ask you the same question. Do you think that when we talk about the bank whose fault was it . We i dont think there was just one factor. I think there was a combination of factors. I think there was deficiencies in governance, and management. There was deficiencies in the Board Management and taking into consideration all the different types of liquidity and capital we. Are those the regulators . Fault the regulators did not act in a timely fashion. And we take responsibility for that. That combined with the impact of social media and how fast one can withdraw their money, money through digital platforms. I believe all those factors. Im sorry, my time is. Up but thank you for your response. All right, the time has respire expired. The wins mr. Williams is recognized for five minutes. Thank you for being here today. In the california internal review report on their supervision of Silicon Valley bank, its states that there was a Staffing Shortage with only two examiner supervising the espy. B goes on to say that it already failed by the time additional examiners were available. Report also indicates that a cc failed to act when examiner in charge elevated need for Additional Resources for. Review this is 2021 in 2020. To california fbi produced budget for 2022, 2023 was hundred 70 billion. Dollars im from, texas thats a lot of money in. Texas and to, some that would be added to keep a fulltime Supervisory Staff up and running. So im curious, what the california dfpi prioritized allocating resources towards . Commissioner, hewlett what was that money used for . If not for an adequate number of supervisors . Going forward we have taken our existing resources and we have added more staff to our Examination Team as it relates to large banks. We have put in when early module systems and mandated a large supervisory plan with emphasis looking at uninsured depositors, particularly in a particular sector. And we have heightened our adherence to ensure that our banks moving forward are large banks remediate in a timely manner. Let me follow, through did a staffing issue occur at any of the eight other banks that the fbi overseas or was just this one . There were staffing issues with which we have now addressed. And we have created an enhanced Monitoring Team as well as a large supervisory plan for large banks. Sounds like theres a lot of people involved with since 2019, Signature Bank had retained less than satisfactory rating in liquidity. The reports that were released stated that Signature Bank was warned multiple times by regulators that theyre at risk. Even on the bank was aware of the, risk they let many of the weaknesses unresolved. We talked a little bit about. That superintendent, harris your testimony you said the failure to contributed to its collapse. So why was there no action taken when you had already downgraded the signatures liquidity and management ratings . And how often do you downgrade to the lowest level . How did that not signal of potential bancalliance . Sir, as weve noted, the regulators, including the fsa, should have taken more swift action to force the bank to remediate the items to and they were left. Open this has been an expensive learning experience, has it not for everybody . So commissioner hewett, Silicon Valley bank was without a chief risk officer freight. Months the dfpi reports indicated that the circumstances of the role was unknown. He was there but he had no he didnt know what he was supposed to. Do i know that in that report he had issues with Risk Management, the boards failure to the kind of Risk Management. So lastly, commissioner q, late when they issued the, emory is very aware of the status of the chief risk officer or to do expect Silicon Valley bank to provide those updates for you . We should have moved in a much more aggressive and timely fashion to make Silicon Valley bank address their deficiencies. All right, lastly, given the Interest Rate risk being a major factor in espy bees. Failure did this elevate to a matter requiring immediate attention . The terms of the Interest Rate risk, they were elevated. Mou was in the process of being initiated. However, before the mou was initiated, the bank run had begun. Okay, usually you hear about more people than you need to in the government. Now weve got too few. So i yield my time. Gentleman yields back. Gentleman from illinois, mr. Casten, is recognized for five minutes. Thank, you mister chairman. Commissioner hewitt, id like to start with. You had a couple hours and gregg becker told us that he was not aware of any discussion of Interest Rate risk that as baby, prior shows monty 23. I think you just mentioned in your conversation with chairman huizenga, i think you said november 2022 you are raising concerns. And in a Washington Post article called Silicon Valleys banks risk model flashed red but executives changed it. It says that Silicon Valley bank purposely change their assumptions of that Interest Rates to hide Interest Rate management to max my short term profits. It says that changing assumptions that the Interest Rates shared with regulars in 2021 or 2022. Can you confirm or deny that you are aware of them changing their Interest Rate risk models in late 2021 . Liquidity Risk Management project plan that Silicon Valley bank im not trying to get you in trouble, im asking about Interest Rate risk. They change the Interest Rate model . The interest were you aware . November 15th, 2022. In a supervisory letter which noted the amar a i dont want to just guess or no, thats all im looking. For can you confirm . They received the supervisory letter in november 15th 2022. Very clearly indicating. He said the article came out, that its incorrect . Its unreliable. In november of 2021, they were notified with the supervisory letters that the Liquidity Risk were low. Im asking specifically about Interest Rate. Models it says they change their models and that the regulators were aware. Not asking when you notified. When did you become where . And is the article right that it was earlier . Well follow up on the record because i want to thrust the time to talk about some of the new york. Issues superintendent, harris i understand that the stablecoin rules in new york require that theyre backed by reserve assets thats fully redeemable, is that correct . Wrecked. And i also write that issuers are not allowed to lend against stable does new york regulate how much a stable coin issuer can keep an undershirt customer deposit . We, do not all that we monitor all of our stable coren in diversified well regulated f t i see insured banks. Okay, i ask that because circle had 3. 3 billion at a sleepy, they also had uninsured deposits at Signature Bank. They could not access. Corn bank has disclosed Corporate Cash at. Signature we know what happened to u. S. D. C. And the collapse that did new york regulations either by statute, or through the supervisory authority, prohibit signature from loaning against the deposit that they had. I think its important to shoe recognize that signature did not hold Digital Assets. They held commercial sure, but if its a stablecoin, its only as good as the reserves. So what im asking is right but under new york law they have to be fully backed. Does 1 deposit doesnt uninsured dollar deposit at a bank with all this Interest Rate risk out under new york state rule thats fully . Backed are stable coin issuers have to have 1 to 1 on chained off chain deposits. So if there is a stable coin outstanding, there has to be 1 denominated 1 an deposit with the depository. But it only matters if the dollar is successful and someone can reach . It it can be held in ust and cash equivalents. But it cant be held in a liquid asset. The reason i raise that is because the only reason why the peg has come back for the u. S. To see is because the feds stepped in and bailed out all the depositors. Im very concerned about the exposure that happened. If we regulate them, and you guys have done a great job in new york. But if you approve this and now the fed has to bail. The only thing that is stable coin does this destabilize our Financial System. To clarify, u. S. D. C. Is not approved by the ss. Its not available for new york. We regulate circle, circles license. But we have product approval. Usbc is not approved for offering new york. A quick question for you. He said that thes available liquidity on monday will be bolstered by substantial deposit inflows from an unspecified tss regulated Virtual Currency company. What Crypto Company were they referring to . That is confidential supervisory information. I would like to be responsive to that in a private but you know who that is . Gentlemans time has expired. You can follow up and writing on that. With, that gentleman from tennessee, the vice chair of the oversight investigations committee, mr. Rose is now recognized for five minutes. Thank you chairman. And thank you for the other chairman and Ranking Members for holding the hearing. Thanks for the witnesses for being here. We commissioner, get your report notes that beginning on march 2020, on fight examination functions were performed virtually drape to the pandemic. Or the examination function still performed virtually with staff working from home . During the period of covid, the examination was performed virtually and frequently, and as many of the examinations revolve reviewing documents, we were able to perform our examinations review virtually. Is that still what youre doing today . We are more in a hybrid state today. Some names in some examinations are on site and some are actually. Do you think its more infective for examiners to be onsite than in person . Or working from home . It really depends upon the bank itself. Its size. I can answer, this is a former bank board member, i can tell you there is no substitute for inperson onsite. There is nothing but strikes fear in the hearts of bankers more than that onset examination. And i would encourage you to move away from that as swiftly as possible because i did not think you can effectively supervise these banks without that specter of that on examination happening. So thank you for. That superintendent, harris you serve on the Financial Stability Oversight Council as a non voting member. Correct . Yes. In 2021 the counsel identified three key priorities related to significant vulnerabilities in the Financial System. Non Bank Financial intermediation, climate related financial risk and treasury market resilience. In 2022, the council identified of fourth priority, risk related to Digital Assets. Superintendent, hairs which is more concrete and imminent threat to the current Financial System . Climate related financial risk or Interest Rate risk . Sir, there are lots of important factors relate to, risk i also want to clarify, i joined the council of the bin of this year, january 2023. Okay, so again, which one do you think is more concrete and maybe i will, stress imminent to point you to the answer im looking for . The current Financial System. Certainly the Interest Rate race weve seen materialize. Sure, and i think there and lies part of the concern that i would have in the current scenario that we saw play out. I would tell, you i think you took your eyes off the goal. And that it is the lone standing fundamental issues that affect banks that were at play here and, unfortunately, my fear is that regulators were looking too far down the field, too far ahead and thinking about things that maybe got their minds off of the real inherent risk to banking. When mr. Hewitt, your report notes that the fbi will require banks to evaluate and account for emerging risks posed by Technology Activities such as social media and time withdrawal. Do you attribute the svb more to the use of social media or to the emergency saying a cape filing on march 8th . The bank i feel is the combination of factors. It is just indicated that created the perfect storm. I cannot assess whether one impact is more than others. I think after more time and review we will have a better picture but to be able to say, was it the filing or was it a results that people could withdraw their deposits on digital platforms in less than a second . I cant say whether one or the other. Was the main factor. I do know that all of them together in the perfect storm. In the time, remaining to think Institutional Investors on wall street react more to social media or other forms of communication like bloomberg terminal notification . Scc filing . Client notes and email chains . . And if you can please respond, im out of time. I yield back gentlemans time has expired. And i think youre going to both be doing some writing responses for the last questions at the tail end of the five minutes. So with, that the gentleman from massachusetts, mr. Lynch is now recognized for five minutes. Thank you, mister chairman. Thanks Ranking Member, is, harris i was curious, what happened to you banks in new york when circle broke the buck . When what is it . The stable coin broke the buck. When it deep egged. We had situations like that occur with it in the past, and i was just curious what the impact was locally. Sir, i want to be clear that while circle is licensed and regulated by d f s, usdc is not approved by gfs and therefore not available in new york for new york consumers. The impact on banks from usdc, i think is maybe less the issue than banks looking to derisk from banking cryptocurrency customers. And their fields deposits, not their Digital Assets deposits. It has a run effect in other words . No, sir at least in the case of signature, when we saw the deposits leaving on the friday afternoon, the deposits that left were Digital Asset customer deposits still in ust. They were roughly proportional what we saw was a run across the Diverse Customer base of Signature Bank. Okay, well, what we saw elsewhere, i guess across the, country it was people moving to bigger banks that they felt were safer and avoided the risk that small banks had with Crypto Assets after signature, after those problems we saw with migration. Im worried about that trend because i dont think its over yet. We see small local Community Banks, people nervous about that. And so there are billions and billions of dollars and deposits that are migrating from those small banks that take care of a lot of smaller businesses and individual depositors. That is a huge shift. Do you think that is helpful . While the entire banking ecosystem . No, absolutely. Not i think the health and safety of our Banking System depends on having this diversity of outside institutions. Yeah. Im just wondering, you know. I did read the feds guidance. They came up with the rule that, you know, presumptively prohibits banks from taking crypto deposits or we stablecoin deposits in many cases. And do you worry that the volatility, because crypto products and stable coin, for that matter, not stable, that it invites when you marry up the Banking Industry with crypto, industry you invite in our import in all of that volatility, this is extremely harmful, to stability of that bank. Well, i agree sir, i would say i want to distinguish between banks that hold Digital Assets themselves, and banks that hold usct as part of deposits for virtual asset companies. They both obviously percent risk and banks have to have appropriate Risk Management protocols in place. Gfs has also issued guidance and state regulated banks. Making sure they understand that they have to get preapproval from us before being engaged in any kind of factual asset activity. The thing im worried about is the migratory effect. Even if a bank is considered to be a crypto bank and ftx happens, Something Like, that you have an inducement for moving assets. And ive just whether or not that is backed or not, would continue to see volatility. Having the 1 to 1 backing as we do in new york also helps prevent depicting because consumers know the liquidity is there. Its one of the reasons weve been so eager to continue working with you and your colleagues to put a federal framework in place that looks like what we do in new york. Yeah, in massachusetts its odd because we have access deposit insurance about the 250. So it actually the limit is 10 million. And we still saw people moving their money to bigger banks and it continues to be a problem. Anyway, thank you, mister chairman, i yield back. Gentlemans time has expired. The gentleman from tennessee, mr. Ogles is now recognized for five minutes. Thank you, mister chairman. Thank you ladies for being here. Miss schuller, you previously stated that the regulators primary responsibility was to evaluate and highlight deficiencies, and ultimately was up to the bank to remediate those deficiencies. My question would, be is beyond that did you have the authority or did your peers have the authority to escalate and essentially forced compliance . , we had the authority to escalate and forced compliance, yes. Maam i have a question for you. And is there anything and regulations that would have prohibited you from escalating the matter at hand with the banks that you are overseeing . There was nothing in the regulations that would prohibit us from escalating. Nothing on the rules that prohibit escalation . No. Both . Accounts now. You said that, as a reference to Climate Change, that its a very data driven approach to Risk Mitigation and operational resiliency. Im curious, theres a three and a half degree change in climate temperatures and exact numerical terms. When you quantified how that will affect Interest Rate . No, sir if there is a 10 reduction in, polarized how will that numerically impact deposits versus Interest Rate risk . No sir. Yes maam. Im curious why any banker regulator would somehow assert Climate Change as part of the regulatory process when your role as fiduciary and not activism. Sir, i agree with you but what i would say is we have institutions with concentration, for instance mortgages in a flood. Someone we want them to engage in fair lending processes but also have proper Risk Management. It doesnt mean not landing in those areas. But being cognizant of concentration risk that may be new in the face of Climate Change. So instead of thinking of it as activism, we at least, in the gfs, approach it as something that should be part of an existing Risk Management framework. The same way they should approach any other risk. One of the examples i use for operational resiliency, for example, is we put the generator on the roof. Not in the basement. Yes maam. So that has nothing to do with Interest Rates or deposits or deposit structure or bank governance. More so, again, to my colleagues point, i think there was some priority given by some of the banks. Not all to Climate Change. And in the virtually no time an Interest Rate. Risk this is problematic both from a Bank Management perspective, but also as you both stated, you have a responsibility. You have the authority to escalate that did not occur. And so obviously there is plenty of blame to go. Around but i think what we have to do in this process is learn from this situation. When i would caution. We have had some of the agencies come before the spotty and ask for more authority, but i think we understand clearly that the regulations that hand gave you the authority to act, and there is nothing prohibiting your ability to act. And so again, i have not heard you ladies ask for more 30. So want to be clear with that fact. I would caution dont come for the committee and asked for more authority when the authority that was given was not used for apparently. I want to go to Capital Requirements, and i think its been stated, chairman jerome, and vice chair barr have recently said that banks were capitalized at the time. There was banks that failed and they were well capitalized. But i think its important to understand that the deposit structure and Interest Rate risk was the key factor here. More money i dont think there was enough money that we could have and what i would say is, i would argue that our Community Banks the Capital Requirements for your Community Banks are too high. If you have a wealth manage bank with lower Liquidity Risk or, exposure, risk that should be taken into an account. So instead of it being a 9 , lets not ratchet that up because what we risk here is forcing smaller and mid sized banks out of the marketplace. And coming from a working class family, i started my First Business when i was very young. It with the local banker who lent me the first loan. Not because i had a great business plan, but because he knew my family. And i just think as you move forward, you must take that into account. Ladies, again, thank you for being here. Mister chairman, i yield. Back gentleman yields back. With that we will be going to the Minority Party Ranking Member, miss waters of california for five minutes. Thank you very much, mister chairman. I would like to direct my question to commissioner humid from california. In your report regarding the failure of Silicon Valley bank, you indicated that your agency is working to better coordinate with better regulators to develop stronger and more effective systems to promptly remediate deficiency. If you could share with us some of the things that you envision that could be done working with the feds that would help deal with the crisis such as what we have just had before us. What are you thinking about and ways to work with the bank to help deal with the deficiencies that lead up to the failure . First and, foremost we have added to our existing resources, more people to our Examination Team who mandate the adherence to timelines. We recognize how important our Community Banks are to our communities. And working with our federal partners, we are from the very beginning going to scope out our plans to find our roles as equal partners in recognition of that important and work closely with our federal partners to ensure that those timelines are adhered to. And we believe that we are both going to have to work much more aggressively, effectively in efficiently in a assuring that the banks in which we provide oversight remediate their deficiencies in a timely manner. Thats very good. But i sense that the federal regulators can take better coordinate to state regulators just like you. I think thats important that the feds and the state know and understand what youre doing and how to work together. Do you think that there is anything in particular that you would like to suggest that could help that relationship strengthen . I indicated, its really important at the very beginning of exams, to get the roll straight. And also define where we might have to act independently if necessary. I also think that after Silicon Valley thank one, that we all have to consider a value waiting the risk, the impact of social media. The impact of how fast one can withdraw deposits through our digital technology. We all have to move faster. We cannot get held up in the bureaucracy anymore in this new age. Thank you very much, as i have listened to the witnesses, they have been an any number of deficiencies that have been articulated about here. During these hearings, and i just wonder, when we talk about the bank having grown so fast. That that was a problem. And with that growth and the uninsured. I dont think the bank provided private insurers. What do you do when you see that the bank is just growing fast because of course, we all support our businesses, we want them to be successful, et cetera. But when youre going fast, does that mean youve got to take a look at the underwriting . What can you do when you see that . It is the responsibility of the Bank Management, to operate their bank. We wont tell the bank how to invest. But we should ask in identifying the deficiencies, specifically in liquidity and Risk Management and hold the banks feet to the fire to make sure that they are taking the risk seriously. Thank you so much for your presence here today. I appreciate the information that you have shared with us tonight. I yield back the balance of my time. Ranking member yields back. With that, the gentleman from south carolina, mr. Timon is recognized for five minutes. Thank you, mister chairman. Your report is notably silent on any examination activity prior to 2020. Yet the g. A. O. Report makes it clear that there was concerns to espy visa Management Practices that were going back to 2018. Why did you not include those in your report . Prior to that date, the Management Practices were primarily concerned with i. T. , audits. But it wasnt until we get into 2022 that we get into the areas of real Liquidity Risk and at that point in time we felt that that was the most important. There we did not note that there were management deficiencies prior to that time. Again. In terms of our review of their i. T. Practices and some of the data privacy. But where we found the most significant deficiency is when they were evaluated for management, governance, liquidity and capital risk. Thank you for that. Can you explain how supervision by you was conducted jointly by the Federal Reserve . I want to show we will assign dedicated examiners, in this case there were two dedicated examiners. We meet with our regional federal partners, and we become involved in the scoping and planning of exam, segmenting the different areas and in this particular batter we took the areas of governance and management from enterprise perspective i. T. Review and asset review. More enhanced reviews as they related to capital and Liquidity Risk. They were taken primarily by our federal partners who did the review. But we are in collaboration with our regional federal partners when it relates to larger banks. When we say larger banks, banks that are over ten billion in assets. And when the banks reaches a point where its over 100 billion in assets, it even goes to another level of review under the Large Foreign Bank organization. Thank. You your report states that from late 2021 throughout 2022, dedicated examiner in charge highlighted the need for Additional Resources to review as pv materials . Even the dnc of Financial Institution managers elevated the need to divert resources to svb. But it did not additional staff to the exam team. In august 2020, to the examiner did report the need for Additional Resources. According to, report no Additional Resources were scheduled to be at it until after the bank failed. How many times typically was it raised before its addressed . Thats one of the reasons why we have added from our existing staff a more enhanced team. We have also added another level of supervisory review. So that when you see areas that would put a bank at a high risk, particularly a large bank, with this level of assets that it is addressed immediately. And that was done after spf he failed . That is correct. Prior to the bank failure, to a similar staffing issue occur in any of the other eight large banks that dfpi overseas . Or was it fully as tv that had the resource request issue . As pv was an outlier. It grew at a very very fast pace. It had assets over 200 billion. And as i previously indicated, our average size for our Community Bank is four billion. And about half of hours, 43, our one billion an asset. Thank, you mister chairman, i yield back. Gentleman yields back. With, that the gentleman from illinois, mr. Foster, is recognized for five minutes. Thank you, mister chair. Superintendent harris, in the Signature Bank failure it seems like the most significant factors was not so much the concentration of crypto client deposits, but a lack of pledge able assets that were a military available for liquidity support. We as the speed run increase the technology. Its gonna be necessary to have even better realtime liquidity Information Available to regulators. I was also surprised to see and your testimony that signature, during the days before the failure, there was a lot of realtime uncertainty about the net impending deposits and withdrawals. So why isnt that realtime information . What are the limiting factors that cause you not to have realtime . Limiting factor in this case was the inability of management to produce the data that is very basic and that any sort of bank managers, board managers, should be able to produce in a moments notice. So ive noticed in our report and testimony, the numbers that all regulators were getting from the bank were inconsistent and unreliable. Its just unacceptable. But did the Bank Management have a realtime dashboard where they could sit there and look to see how deposits are flowing in and out. They should or at least have the ability to assess the value of collateral that they have, the value of the security they have. But that separate, it seems like deposits might be a simpler case. Other things that limit what items limit having realtime withdrawal information . Mostly settlement times and the variety of systems the bank might. Use some certainly in the case of signature they were too slow and unrealistic about their deposit and withdraw inflows and outflows respectively. Okay, to get access when they get access to get access when its resolved . We get data many times throughout that weekend. We were faced with hours long delay in those productions. Quickly changing estimates into. Minutes seems like they should just give you the password to an account where you get to see whatever dashboard theyre looking at. To the issue of collateral. You know, are there mechanisms for example, what is your view of the bank system and how quickly theyre able to respond . Are the deficiencies . There are other ways to speed up qualifying collateral . Are these just mechanisms that exist that werent used at the time . Mechanisms for evaluating collateral probably bear some modernization. Its probably one of the reasons why in our report we success operational stress. Testing tabletop exercising that institutions canned engage in with the regulators to run these drills realtime so that in the event of real life crisis theyre better equipped to provide data collateral and the steps that they need to to get a liquidity. Are there any significant third parties who could step in who have the same level of tyler no logical connection . For example the Federal Reserve is the main backstop when this sort of thing happens . The Federal Reserve and the other regulators, gfs, fdic worked very quickly and very well to help overcome some of those operational challenges. For instance, working with the federal home owned bank and the new york fed to make sure that the federal bank could subordinate its interest in collateral to the fed in order to get faster liquidity. And that is for the bank when it couldnt get that liquidity. So we would have liked that from the discount. Window what is the risk when they took on the subordinated interest . Im a physicist not a banker. Well, i think the same amount of risk whenever you subordinate your interest in some sort of debt. When you lower yourself in the priority stack, you enhance the risk because you are a lower priority debtor. So i think thats the case with any type of debt. But this would be the Home Loan Bank going belly up that would cause them trouble. Which presumably should not happen. Or we would be forced to do something about it if it did. So it wasnt a major risk. There yeah. You know, during that crisis 12 years ago at instances where Warren Buffett stepped in and said im going to help out. Is there a merit to have a group of accredited people with the right technology who can step in and provide liquid support in emergency situations . Is there a need for Something Like that to have something besides the Federal Reserve . I think in the face of what we are learning about, the speed and impact of social media, digital banking. We should be considering all kinds of alternatives to make sure the Banking System is safe and sound. It has to respond on the same time scale as the internet. Yeah and, we want to make sure it has the same safeguards. Thank, you i yield back. Gentlemans time has expired. The gentleman from wisconsin, mr. Fitzgerald is recognized. Hey mister chair, on november 11th, 2022, wall street journal article explained at length Interest Rate risks presented to the Banking System by the feds inflation. Its rapid increase in Interest Rates. Silicon valley bank was mentioned as a particular case. With, as of september 30th, 2020, to the market value is held to maturity bonds just slightly above the value of its total equity. So clearly the regulators should have been becoming aware of risks if they werent already. Surrounding Silicon Valley bank, commissioner hewlett, if the uninsured depositors had not force the bank to close, how much longer do you think the regulators would have allowed Silicon Valley to remain open . Without intervening . In milieu was in the process of being initiated. However, the bank run occurred before the mou was initiated. So i believe it would have depended upon how the bank responded to the ammo you. If they did not respond to the mou, or any subsequent orders, we would have had to take it to another level in the form of a Consent Decree cease and desist. It is hard for me to say, sitting here today, how long it depended upon their response. And, as you are well aware, they stay charted banks in the federally chartered banks. Im just curious, something that has not come out much is the involvement of the state of california, you are off this, and gavin newsom, governor, talked about his interactions with both the white house and the treasury. Were you part of those conversations . How did those evolve as it was discovered that the bank could be in trouble . I was not involved in any Systemic Risk discussion norton i discussed anything in regard to Systemic Risk with the governor. Very good. So when the banks see rates move up as they did the realized losses when they securities were in place did you anticipate that you would have other Regional Banks in california that could be deposits that could be pulled . And the point that Silicon Valley bank rans began. We really began enhanced monitoring of all of our Community Banks. We received our lab reports. We monitored the deposits on an hourly basis because once that fear starts it is easy for it to spread, regardless of how well and the Bank Management is running the bank, regardless of how much capital the fear causes. We were monitoring very closely to try to contain it. In your role as commissioner, what do you feel . What do you feel was your responsibility . Or, did you have a responsibility as i started to develop . I guess thats the question. We were focused as a result of the run, on all of our other banks within california. In the focus, we contacted each and every one of our bank that we thought might be a risk from the fear, and the contagion, to give them as much support as possible. Okay. Fortunately, we were able to resolve a number of the issues. That fear and that contagion did not spread throughout our Financial System. Were you in contact with the fdic throughout this process as well . I was only in contact with the fdic in terms of taking possession of the bank. Liquidating it. Turning it over to the fdic and respeakership. From that point on i was not in contact with the fdic in terms of what would be done in terms of the uninsured depositors. Or whatever negotiations may or may not have been taking place in terms of finding the gentlemans time has expired. Thank, you audio. Back with, that the gentlewoman from massachusetts, ms. Pressley, and now recognized for five minutes. Thank you. Thank you to our witnesses for joining us today. Obviously the collapse of Silicon Valley bank and Signature Bank have had significant implications for both our Financial System as well as a regulatory framework. It is good to have the state regulated before this committee to testify discuss reports regarding new york in california. Svb and mutual bank, respectively. Reporting on the failure of svb identified several areas of concern about svbs governance and Risk Management in may of last year. The regulators essentially downgraded the misgender component of svb 2021 rating. When the government took control rating as a holding company. Commissioner hewletts notes report that at the time svbs manager rating was deregulated the did not perceive any imminent threat to the bank. Can you explain why this was the case . The first downgrading of the bank, the deficiencies that were noted were primarily in i t. On the second downgrade of the bank, when they were doing the liquidity review, it had been downgraded further to a three, less than satisfactory, the regulators felt they had more time. They did not anticipate the type of run that occurred at this bank. 42 billion dollars went out in one day. In hindsight, regulators should have been much more aggressive. Made the Bank Management and here to the timeline. Thank you. To follow up, the report also mentioned that historically Bank Examiners have not viewed a high ratio of uninsured deposits as a significant risk factor. Do you recognize that a high risk of uninsured deposits that svb contributed to the run on svb . Do you think regulators to commit to increasing their focus on bank with high ratios of uninsured deposits . I do. That is exactly what we are doing right now. As a result of this, in hindsight, the we have enhanced our team. One of the areas that we are taking into consideration in our Early Morning module is those banks that have a High Percentage of uninsured depositors. In one particular area. I would say that this really was an outlier. Silicon valley bank. 93 of uninsured depositors is highly unusual. It is not what you see in your average Community Bank. Very good. We are agree that regulators should take steps to mitigate risks that can arise from having such a large amount of uninsured deposits. We really do want to learn their lessons from these past few months and reform these practices to ensure that this does not happen again. I am of the opinion, as are many of my colleagues on this side, that reinstating the doddfrank regulatory requirements on mid sized banks emerald back in 2018 by republicans are really critical. We can learn from this on the state level, as well. I urge my colleagues to support these measures being reinstated. Again, thank you coming before the committee. I yield. The gentlewoman yields. The gentlewoman from california, ms. Kim, is now recognized for five minutes. Thank you, chairman. High inflation the highest in over four decades, has led to relax conferences in the form of failed banks and over 400 billion dollars in assets wiped out from two of the largest banks headquartered in california. In total we have seen three banks failing under the watch of california state regulators. More recently, First Republic of the Second Largest Bank in the United States, just behind, you know, washington mutual. With the, commissioners you of it, why do you think the Financial Institutions are bearing the brunt of this current to stress in the Banking Industry . In terms of, first, Silicon Valley bank is, as i briefly stated, i dont think there was just one factor. There were numerous factors that created the perfect storm. Once the run started as a result of deficiencies in governance and management. Deficiencies and taking into consideration Risk Management in the areas of capital. Risk in the quidy risks. Once you see the impact of social media. Digital platforms. How quickly one can withdraw their money from the bank, in addition to regulators not asking all of that started that run on Silicon Valley bank. Once that fear starts, the fear driven, social media driven, internet driven . Then it will spread. Right. Other banks, and regardless of when we reclaim my time so i can ask you another question. Can you explain how supervision was conducted jointly with the Federal Reserve when the bank was in the Regional Banking Organization Portfolio . Generally, when we have banks that are over ten billion dollars we wow, in particular lee in this case, we have a very large bank. Maybe even 100 billion to 200 billion, we will examine that bank in accordance with whoever is the primary regulator. The primary regulator in this case with the Federal Reserve bank. We meet together at the regional level to determine the different portions of the exam. Who is going to do which portions of the exam. There are some portions of the exam that we would do together. In this case you had. An added factor they had grown so rapidly that it fell under the category of a Large Foreign Bank organization. In addition to working with the regional it went up to the examiners in d. C. Who were highly trained and examining thank you, commissioner hewlett. I wanted to talk about the report so let me stop you there. In the beginning of that you state that there was a divided debate over the state of svb. The Federal Reserve board and San Francisco assumed and lead role for its lead and svb. Later in that room for its sights that svb was examined jointly f i bs f. The wording makes it appears as if the only involved in a substantive role in the related bank activity. Is it true that relies on supervision by certain overtime activity by state chartered banks . Firstly we examine different sections separately. The f dion was very much taking the lead on governance and management of the bank. They took the lead on the icy examination of that bank. They took the lead on the path that examination of the bank. However, when i came to examination under the large foreign think Organization Program the case the more experienced team of the Federal Reserve program out of the fbi and conduct itself as a state regulator if its involved in a portion of the supervision . This is one of the reasons why im sorry. This is why we had an advance. Team im sorry to interrupt. But time has expired. Thank. You we can get a written answer on that. With that, excuse, me the gentlewoman for michigan earnestly she is now recognized for five minutes. Thank you mister. Chair superintendent hern do you think what you happened with Silicon Valley bank led to the other failures . Yes, i do. Why . I think it was a contagion effect between social media. The speed was wrong. The association. However valid between some of the banks led to a contagion effect. Back to harris, rebeccas here, to do both into the testimony before . I did. In part, yes. One of the things that were interesting was becker kept talking about social media. I can understand the other six the emphasize of the major factor of other mismanagement. This poof became social media. I wanted to get to you, commissioner. I know, i see you. How much of that was wade . I can ask the commissioner but he basically is leaning on this claim that social media was the reason. I think the failure of Bank Management to have adequately quickly Richmond Smith is really at fault. Commissioner i appreciate you being here. I think Silicon Valley bank exposed a lot of areas in i dont know if you listen to the testimony of becker the former ceo beforehand. Did you . I did not listen. I heard about some portions of it. Thats fair. One of the things that i kept hearing about i know that if im getting the email. How do you guys send correspondents to Silicon Valley . That its a subject mother requiring intention . Im being serious. What was being sent them . We received seven supervisory letters detailing their deficiencies. There was 31 mras. And i are a. Matters requiring immediate attention. They were on notice as their deficiency. I think the committee should sunday transcript of the whole testimony. We went through the timeline, as you can see. You know, in january, they started changing their trading plans. What they call trading plans. Were you aware of that . In january . That they started to implement what they called trading plan change . Where you wear of that, commissioner . We became aware from the state perspective afterwards. We highlighted the risks. January 26th, they do. That they implement a change to the Corporate Trading plans. If you listen to the testimony its completely unrelated its like, oops. We failed. After the bonuses. After combination. Which they claim was set and scheduled beforehand. Do you believe that . The matter is under investigation right now. I think it will come to light soon. You are going to investigate the role of compensation and incentives in the report, maam . We have other programs. I cannot confirm or deny other investigations that are ongoing. You think the Incentive Plan has contributed to Risk Management and response demonstrated by Silicon Valley bank . I do think it did contribute. It was more of a focus on earnings in gains. Then there was and Risk Management through the chair i really think that there should be an investigation into whether or not mr. Becker was fully truthful with us as members of congress in this committee. It was very telling of how little he claimed to know. What others knew and that this was by coincidence that this timeline, if you look at it, and he lay person can look at this and say that this is set up in a way, again, for him to make millions. Everyone walks away while a Financial System in our country is, basically, hurricane harmed and you can see with the two other banks that failed. I know there is nothing making it back. I really would love for you all to respond directly to some of the testimony by becker. I think it is very telling how little he claims to know. I do not believe that he doesnt know all of what was going down. The gentleladys time has expired. The gentleman from florida, mr. Donalds, is network enough for five minutes. Thank you mister chairman. Mr. Harris thank you so much for being here. Miss your that, and well start with you. Everything up and able to surmise from todays hearing is there is a dual regulator for espy be. Part your department apart the Federal Reserve bank of San Francisco. At what point did you or the fed realize you are having structural Balance Sheet liquidity issues with svb . We recognize that march 9th, when svb had a negative cash balance of 958 million, they were insolvent. I think everyone understands the insolvency aspect. But at what point did the supervisors of the bank the people on the ground today start to see that there were potential issues with the structure of the bouncy . When did that start occurring . The bank handed sided at least 13 times up until its failure. Give me that process. They were not notified. They were known for the numerous times. Definitely in 2022 i dont i cant speculate as to what was in their mind they were given numerous supervisory letters. Definitely when that run started to happen to positive started to withdraw their money out of the bank if you let, once the run starts the game is over. The runway, understand that piece. There were cited numerous time. In commercial banking thats where i started my career. Ive dealt with regulators. They were cited regular what was the response from Silicon Valley bank when they were being . Cited what was their response . Actually, what was the tone from your agency or from the fed in response to Silicon Valley bank and then lack a of issues coming up in their audits interviews . He the crudity risks were noted in 2021. Remediation was not taken seriously but Bank Management. Regulators did not move aggressively why didnt the regulators move aggressively enough . I do believe that regulators at the time aim worked more in a culture, particularly on the state banking side, to give a bank time to remediate i have two minutes left. I understand what you are saying. From our perspective we have various members i want to talk about new regulations and Different Things like that. What it appears to me as, i svb was too cozy with the regulators. A lot of fraternization going on. Nobody put the hammer down when they shouldve at a time when they noticed a structural liquidity issues on the Balance Sheet. Miss harris, i know we talked a lot about as we begin this hearing. In new york, Signature Bank, what was the supervisory findings given to Signature Bank before their collapse . Yes. Numerous. What was the response from Signature Bank . And adequate rename ration. What was the response from the regulators . In some cases downgrades. In some cases additional to provide any recommendations. Nothing in strong as there should. One nothing is strong okay. It seems that we are in the same place here. By the way im not a man with doddfrank is someone who works in the doddfranks an albatross the regulatory scheme doesnt make a lot of sense. Under doddfranks framework. We still have these banking issues. It may not mean the large massive banks. Original banks played a significant role in our Financial System. What i want to ask both of you, being representatives of your regulatory agencies, what is going to change, in terms of holding Bank Management to sound banking principles . They can just look at your letters and ignore you. Its our, i will be the first that think that is a good point. We are working to escalate things. My time at gfs, we are taking swift or more severe action when necessary. The final question, miss harris, let me ask you. Do you think it is appropriate at this time for the Federal Reserve to be in charge of Regulatory Oversight of banks . Do you think theyre good at the job . I think we are working to improve oversight. I. I yield. Back to dame time has expired. I would like to thank supervisor harris and commissioner hugh litt for your time today. This has been helpful. And gives us an additional picture into what has been going on. Without objection, all members will have five legislative days within which to submit additional written questions to these witnesses. You write the questions to the chair. We will for those on to the witnesses for their response. I would ask each of you to respond and promptly as you are able. There were a number of instances where answer was either truncated or a question with ask but not able to get an answer so again we appreciate this we look to make sure we have safety and soundness of our Financial Institutions here in the United States. Make sure that the regulators that are supposed to be holding them accountable are cannibal to us. That is the goal of todays hearing. Today the hearing is adjourned