Silicon Valley Bank CEO slammed for ‘stupid’ strategy
Silicon Valley Bank – The initial distress of the SVB collapse has passed out, and people are looking for someone to blame.
Silicon Valley Bank CEO Greg Becker is being blamed by the tech industry.
Many people hold Becker responsible for the corporation’s standing as the second-largest American financial disaster in history.
According to an alleged SVB employee, Becker openly acknowledged the bank’s financial difficulties before secretly offering cash aid to weather the storm.
As a result of the actions, many withdrew their money, creating a scared atmosphere.
“That was absolutely idiotic,” said the employee. “They were being very transparent.”
“It’s the exact opposite of what you’d normally see in a scandal. But their transparency and forthright-ness did them in.”
Last Wednesday night, Greg Becker and his leadership team stated that they expected to raise $2.25 billion in cash from $21 billion in asset sales, resulting in a $1.8 billion loss.
SVB has failed to make any definite commitments, despite its best efforts.
The announcement jolted Silicon Valley, where the bank has been a key lender to tech entrepreneurs.
Several entrepreneurs were worried.
Many firms withdrew $42 billion on Thursday, according to California regulator data, while Silicon Valley Bank’s shares plunged 60%.
Silicon Valley Bank had a negative cash position of around $958 million when it ended that day.
“People are just shocked at how stupid the CEO is,” said the SVB employee.
“You’re in business for 40 years and you are telling me you can’t raise $2 billion privately? Get on a jet and fly to Kuwait like everyone else and give them control of one-third of the bank.”
The CEO of Silicon Valley Bank, Greg Becker, is said to have apologized to staff in a video statement.
“It’s with an incredibly heavy heart that I’m here to deliver this message,” said Becker.
“I can’t imagine what was going through your head and wonder, you know, about your job, your future.”
Read also: Silicon Valley Bank collapsed, crypto space affected
According to Jeff Sonnenfeld, CEO of Yale School of Management’s Chief Executive Leadership Institute (CELI), Silicon Valley Bank officials deserve to be chastised for their “tone-deaf, mismanaged execution.”
Sonnenfeld and CELI’s research director, Steven Lian, declared in a joint statement:
“Someone lit a match and the bank yelled, ‘Fire!’ – pulling the alarms in earnest out of genuine concern for transparency and honesty.”
Sonnenfeld and Tian stated on Wednesday night that publicizing the $2.25 billion unsubscribed capital offering was unnecessary.
They stated that Silicon Valley Bank has adequate capital to meet regulatory standards.
They also claimed that disclosing the $1.8 billion gap was unnecessary.
According to Sonnenfeld and Tian, the one-two punch created a tremendous frenzy, culminating in a rush to withdraw deposits.
They suggested that the bank may have separated the statements by at least one or two weeks, therefore lessening the impact.
President Joe Biden’s administration launched a proposal to help Silicon Valley bank clients on Sunday.
Biden also stated that the US government will properly investigate all parties involved in the SVB disaster.
He released a statement saying:
“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
The Fed’s involvement
Jerome Powell, the Chairman of the Federal Reserve and Biden’s choice to lead the Feds, and his colleagues, according to Jeff Sonnenfeld and Steven Lian, carry part of the blame.
“There should be no mistaking that Silicon Valley Bank’s collapse was a direct result of the Fed’s persistent and excessive interest rate hike,” they wrote.
According to them, the Fed’s attempts to decrease inflation had two impacts:
- The value of the bonds Silicon Valley Bank was relying on for capital
- The value of the tech startups SVB catered
Silicon Valley Bank, on the other hand, had more than a year to plan for and address the difficulties.
The unidentified SVB employee referred to the bank’s balance-sheet manipulation as “stupidity,” calling the CEO and CFO’s plan into question.
But, the employee, who is also a Wall Street veteran, feels the bank’s demise was due to errors and “naivety” rather than unlawful activities.
“The saddest thing is that this place is Boy Scouts,” they said.
“They made mistakes, but these are not bad people.”
Image source: The Business Journal