New York — The tech sector is accusing Silicon Valley Bank CEO Greg Becker of causing the bank's collapse, which has become the second-largest banking failure in US history.
An anonymous employee from the bank's asset management side expressed disbelief at how Becker publicly disclosed the extent of the bank's financial issues without first securing private financial support. This transparency led to widespread panic as customers rushed to withdraw their funds.
Last Wednesday night, Becker and his leadership team announced their intention to raise $2.25 billion in capital and sell $21 billion in assets, resulting in a $1.8 billion loss. This news triggered fear throughout Silicon Valley, where the bank is a key lender for tech startups. On the following day, $42 billion was withdrawn, and Silicon Valley Bank's stock dropped by 60%, according to California regulators' filings. By the end of the day, the bank had a negative cash balance of around $958 million.
Jeff Sonnenfeld, CEO of Yale School of Management's Chief Executive Leadership Institute (CELI), agrees that the bank's leadership should be criticized for their poor execution. He and CELI's research director, Steven Tian, believe that the announcement of the $2.25 billion capital raise was not only unnecessary but also contributed to the widespread hysteria. They suggested spacing out the announcements by a week or two to reduce the magnitude of the panic.
After the announcement of a rescue for Silicon Valley Bank depositors, President Joe Biden emphasized his commitment to holding those responsible for the collapse accountable and strengthening oversight and regulation of larger banks.
Sonnenfeld and Tian argue that Federal Reserve Chairman Jerome Powell and his colleagues also share some of the blame, as the bank's collapse resulted from the Fed's persistent and excessive interest rate hikes. These hikes depressed the value of bonds the bank relied on for capital and the value of the tech startups it served.
An insider at Silicon Valley Bank blamed mismanagement and questioned the CEO and CFO's strategy, but emphasized that the bank's downfall was due to mistakes and naivety rather than outright wrongdoing.
