Former executives from bankrupt Silicon Valley Bank and Signature Bank sought to explain the sequence of events that led to the two banks' failures in March before the Senate Banking, Housing and Urban Affairs Committee on Tuesday.
"We took risk management seriously," said Gregory Becker, former CEO of Silicon Valley Bank.
Becker remarked SVB had sufficient liquidity and was adequately capitalized, claiming SVB was a different bank compared to the crypto-focused Silvergate Capital.
Rumors and misconceptions quickly spread online and on social media triggering an unprecedented bank run, with more than $1 million in outflows a minute, Becker stated.
"I am truly sorry for how this has impacted SVB's employees, clients, and shareholders," the former CEO told the committee.
"We had ample liquidity and we were able to even handle the fastest bank run in history, given that $41 of $42 billion deposit outflows on March 9th were covered by SVB, and we could have handled even more.
"It's the unprecedented event that was the anomaly," Becker added.
When asked if SVB's government bond holdings, which accounted for around 55% of total assets, were adequately hedged for interest rate risk, Becker said he couldn't recall the specifics of the hedges that were put in place.
"Mr. Becker you made a really stupid bet that went bad, and the taxpayers had to pick up the tab for your stupidity. This was bone deep, down to the marrow, stupid," Sen. John Kennedy (R-La.) stated. "You put all your eggs in one basket."
When asked if the large number of uninsured deposits were adequately supported by collateral, Scott Shay, former chairman and co-founder of Signature Bank, said that the bank had a well-diversified deposit mix and the liquidity to back those assets.
The former executive of Signature Bank declined to comment on whether the bank's exposure to crypto assets was the primary cause for its closure by the regulator.
"Signature Bank was a responsibly managed bank and solvent until the end," Shay answered to Sen. Elizabeth Warren (D-Mass.) after she asked how much of the $20 dollars Shay earned in bonuses and stock options through loading up on risk in the bank.
The SPDR S&P Regional Banking ETF (NYSE: KRE) traded flat on midday Tuesday, after rising as much as 3.2% Monday.
PacWest Bancorp (NASDAQ: PACW) was the underperformer among regional banks, falling 4% on the day.
Bank of Hawaii Corp. (NYSE: BOH) and Western Alliance Bancorporation (NYSE: WAL) were the outperformers, up 5% and 3.7%, respectively.