This story was first published in the Lever
Eight years before the second-largest bank failure in American history occurred this week, the bank’s president personally pressed Congress to reduce scrutiny of his financial institution, citing the “low risk profile of our activities and business model”, according to federal records reviewed by the Lever.
Three years later – after the bank spent more than half a million dollars on federal lobbying – lawmakers obliged.
On Friday, California regulators shut down the Silicon Valley Bank (SVB), a top lender to venture capital firms and tech startups, and the Federal Deposit Insurance Corporation took it over, following a bank run by its customers. The bank reportedly did not have a chief risk officer in the months leading up to the collapse, while more than 90% of its deposits were not insured.
In 2015, SVB President Greg Becker submitted a statement to a Senate panel pushing legislators to exempt more banks – including his own – from new regulations passed in the wake of the 2008 financial crisis. Despite warnings from some senators, Becker’s lobbying effort was ultimately successful.
Touting “SVB’s deep understanding of the markets it serves, our strong risk management practices”, Becker argued that his bank would soon reach $50bn in assets, which under the law would trigger “enhanced prudential standards”, including more stringent regulations, stress tests and capital requirements for his and other similarly sized banks.
In his testimony, Becker insisted that $250bn was a more appropriate threshold.
“Without such changes, SVB likely will need to divert significant resources from providing financing to job-creating companies in the innovation economy to complying with enhanced prudential standards and other requirements,” said Becker, who reportedly sold $3.6m of his own stock two weeks ago, in the lead-up to the bank’s collapse. “Given the low risk profile of our activities and business model, such a result would stifle our ability to provide credit to our clients without any meaningful corresponding reduction in risk.”
Two months later, SVB added the former Obama treasury department official Mary Miller to its board, noting she had previously helped oversee “financial regulatory reforms”.
Around that time, federal disclosure records show the bank was lobbying lawmakers on “financial regulatory reform” and the Systemic Risk Designation Improvement Act of 2015 – a bill that was the precursor to legislation ultimately signed by President Donald Trump that increased the regulatory threshold for stronger stress tests to $250bn.
Trump signed the bill despite a report from Democrats on Congress’s joint economic committee warning that under the new law, SVB and other banks of its size “would no longer be subject to nearly any enhanced regulations”.
The bill was supported in the Senate by 50 Repu
