A top House Republican says White House “mismanagement” helped trigger the recent banking crisis.
Rep. Patrick McHenry (R-N.C.) chairs the House Financial Services Committee, which on Wednesday (May 17) convened hearings to question the ex-CEOs of three regional banks that failed in recent weeks.
In his opening remarks, McHenry said the heads of Silicon Valley Bank (SVB), Signature Bank and First Republic Bank all bear responsibility as “captain” of their respective ships, but he also suggested the banks shouldn’t have listened to government reassurances that inflation was “transitory.”
“The economic mismanagement by the Biden Administration created the perfect storm and each of you failed to right the ship,” said McHenry.
He also took issue with the Biden administration’s use of the word “idiosyncratic” to describe SVB’s downfall.
“Clearly, as there are three of you here today, the problem goes much deeper,” McHenry said.
“So, while we’ll hear from each of you and the New York and California regulators today, I think it’s important to take a step back and really examine the undercurrents that caused this crisis.”
His comments came one day after three former bank executives — Gregory Becker, former CEO of SVB; Scott Shay, former chairman and co-founder of Signature Bank; and Eric Howell, former president of Signature Bank — testified during an often contentious Senate hearing.
“All three witnesses repeatedly emphasized their institutions’ impact on small businesses that form ‘the backbone of the U.S. economy,’ while skirting the impact that may result from the failure of their businesses,” PYMNTS wrote.
Among the senators questioning the executives was Ohio Democrat Sherrod Brown, who criticized the bank’s lack of oversight.
“You never slowed down to make sure you were doing basic bank management,” Brown said, adding that the executives “put short-term profits above everything else. … You were paying out bonuses until literally hours before regulators seized your assets.
“Only in corporate boardrooms can you run your business into the ground, take the whole economy along with you and come out ahead,” Brown said.
The hearing marked the first public appearance by SVB’s Becker since the bank was taken over by regulators in March, though he declined to answer questions around his sale of company stock during the run up to the collapse, which netted him millions.
As PYMNTS has reported, both the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are investigating the stock sales.
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