Silicon Valley Bank, which focuses on providing financial services to start-ups, suddenly went bankrupt recently, becoming the largest bank failure in the United States since the 2008 financial crisis. The sudden collapse of Silicon Valley Bank has roiled global markets, tying up vast sums of money belonging to technology companies and investors. Silicon Valley Bank has changed from a “sweet pastry” widely sought after by technology companies to an “outcast” taken over by US federal regulators. In this process, the CEO of the bank has always been on the cusp of the crisis. — Greg Becker.
Joined Silicon Valley Bank by chance
Born in the late 1960s, Becker grew up on a large farm in Fort Wayne, Indiana. His father runs a local trading company and his family is relatively well off. Becker began his career at a bank in Detroit after graduating with a finance major from Indiana University’s Kelley School of Business.
The US “Investor’s Business Daily” said that the bank initially incorrectly stated in the records that Becker had an MBA degree, and he voluntarily corrected the error, indicating that he only received a bachelor’s degree. This approach won him the appreciation of his superiors and helped him gain opportunities for career advancement. Becker’s manager at the time then sent him to work at the bank’s California offices, where he landed an offer from Silicon Valley Bank.
In 1996, he was responsible for opening a branch for Silicon Valley Bank in Boulder, Colorado. When he returned to Silicon Valley in 1999, he founded SVB Capital, the venture capital fund management arm of Silicon Valley Financial Group. In 2008, he was promoted to president of Silicon Valley Bank. In 2010, he became president of Silicon Valley Bank’s financial group. A year later, Becker began serving as CEO of both Silicon Valley Bank and SVB Financial Group. Before the collapse of Silicon Valley Bank, Baker was also a member of the board of the Federal Reserve Bank of San Francisco, but he resigned after the crisis.
Still stabilizing customers 24 hours before bankruptcy
Becker, who accompanied Silicon Valley Bank through the US Internet bubble stage, has always insisted that technological innovation can bring huge returns to capital. The US “Wall Street Journal” reported that when other banks retreated from risky industries, Silicon Valley Bank is willing to provide funds for start-ups with great potential but thin profits. “At Silicon Valley Bank, we work with the coolest companies in the world,” Becker said in a 2019 podcast.
When he first joined Silicon Valley Bank in 1993, as a loan officer, Becker provided a $350,000 loan to a technology company in one transaction, which was later acquired by Cisco for $100 million. This contact with technology companies had a great influence on Becker. After taking charge of Silicon Valley Bank, he decided to make technology companies the main customer group of Silicon Valley Bank.
Silicon Valley Bank’s strategy of focusing on serving technology companies for many years has indeed paid off. The Wall Street Journal data shows that Silicon Valley Bank’s stock price has risen 54% in 2020, followed by a 75% surge in 2021, when the bank’s deposits soared 86%.
In 2015, Becker testified before the U.S. Senate Banking Committee that regulation should be relaxed for smaller banks like Silicon Valley Bank. Silicon Valley Bank weathered the financial crisis with good credit quality, increasing the number of loans it made by nearly 70 percent from 2007 to 2011, Becker said. He claimed that Silicon Valley Bank has no systemic risk, and the “Dodd-Frank Act” to protect the rights of depositors will bring them a huge burden.
According to reports, even 3 days before the bank collapsed, Becker declared to the outside world that now is a “good time to start a company”, and there are exciting fields in each category of agricultural technology, financial technology, clean technology, medical technology and personalized medicine. things. Just 24 hours before SVB declared bankruptcy, Becker personally called clients to reassure them that their funds at the bank were safe.
Sell stocks to cash out 2.3 million
The Wall Street Journal reported that last year, the technology industry was hit hard, and the U.S. IPO market “dried up.” The Nasdaq index, dominated by technology stocks, fell 33%, the biggest drop since the 2008 financial crisis. At the same time, the Federal Reserve began raising interest rates at the fastest pace in decades. But for these, Silicon Valley Bank does not seem to take it seriously.
However, the Wall Street Journal reported, citing people familiar with the matter, that Becker sold his stock holdings a week before the bank collapsed. Becker exercised options on 12,451 shares on Feb. 27, earning about $2.3 million. According to Bloomberg’s analysis, Becker’s behavior complies with the current US regulatory requirements, and there is no evidence that he foresaw the upheaval of Silicon Valley Bank more than a month later when he submitted the stock sale plan on January 26.
However, critics point out that there are serious loopholes in the current US regulatory rules. At the end of last year, the U.S. regulatory authorities formulated new regulations that executives must wait for a three-month “cooling-off period” before they can sell shares. However, this regulation was implemented on February 27 this year and is only valid for stocks sold after April 1. Baker Er just dodged the past.
After Silicon Valley Bank collapsed, Becker came under criticism from U.S. Sen. Elizabeth Warren, California Rep. Ro Khanna and San Jose Mayor Matt Mahan, who demanded that the money raised from the sale of Becker’s stock be repatriated. to depositors.
According to a report by the American Public Television Network (PBS), shareholders of Silicon Valley Bank have filed a class action lawsuit against Becker and other Silicon Valley Bank executives, claiming that they failed to fully disclose the risks of the Federal Reserve’s interest rate hike warning and demanding compensation for investor losses.
On March 13, the new CEO of Silicon Valley Bank, Maopoulos, took office under the appointment of the Federal Deposit Insurance Corporation of the United States. It remains to be seen whether he can clean up the mess left by Becker.
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