Republican Louisiana Sen. John Kennedy confronted former Silicon Valley Bank (SVB) President Greg Becker about his decision-making preceding the bank’s failure at a Senate Banking Committee hearing Tuesday.
“Mr. Becker, you made a really stupid bet that went bad, didn’t you? And the taxpayers of America had to pick up the tab for your stupidity, didn’t they?” Kennedy asked.
Becker attempted to explain the bank’s failure as the result of events that he could not have foreseen.
“Senator, there were a series of unprecedented events that occurred that led us to where we are today,” Becker said.
Kennedy disagreed.
“No, this wasn’t unprecedented. This was bone-deep, down to the marrow, stupid,” he responded. “You put all your eggs in one basket … and unless you were living on the international space station, you could see that interest rates were rising and you weren’t hedged.”
Kennedy asked Becker if, when interest rates rise, the value of long-term government bonds declines, and Becker answered affirmatively. “And you don’t have to be Einstein’s cousin to know that, do you?” Kennedy asked.
“No you don’t,” Becker answered.
SVB had roughly 55% of its assets invested in these bonds, according to Becker at the hearing. When interest rates rose, they lost immense value.
Kennedy accused Becker of not purchasing hedges because he would receive less compensation in his bonus.
“You weren’t hedged. If you’d bought those hedges, that would have cut into your profits, wouldn’t it?” Kennedy asked.
Becker also sold $3.6 million in company stock before his bank failed in March, according to Bloomberg.
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