Rep. Ro Khanna (D-CA) is calling for the CEO of Silicon Valley Bank to return the millions of dollars worth in stock sale gains he reaped before the company's collapse.
SVB, which was the 16th-largest federally insured bank in the United States, was shut down by the state of California on Friday after failing to raise over $2.2 billion in capital. Now, amid the Federal Deposit Insurance Corporation making plans to bail out customers through emergency measures, SVB's CEO Greg Becker should hand back shares valued at $3.6 billion that his trust sold on Feb. 27, Khanna said.
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“There should be a clawback of any of that money,” the California Democrat told the Washington Post. “It should be going to the depositors.”
Khanna's comments come as debate ensues about how the government should handle the $209 billion collapse of SBV, which is the largest bank failure since the $307 billion implosion of Washington Mutual during the 2008 financial crisis. The Federal Reserve, the FDIC, and the Treasury Department said on Sunday that the FDIC will ensure customers "have access to all of their money" on Monday and that taxpayers won't pay for the purported "resolution."
"All customers who had deposits at these banks can rest assured, rest assured they'll be protected and they'll have access to their money as of today," President Joe Biden said on Monday. "That includes small businesses across the country that bank there and need to make payroll, pay their bills, and stay open for business."
"This is an important point: No losses will be borne by the taxpayers," the president added. "I'm going to repeat that. No losses will be borne by the taxpayers. Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund. Because of the actions of that, because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there, if and when they need them."
However, Biden didn't address whether he expects SVB's collapse to cause a "ripple effect," in the sense that other banks could possibly fail. U.S. banks were sitting on $620 billion in unrealized potential losses at the conclusion of 2022, according to the FDIC.
SVB, like its competitors, retained cash deposits while also purchasing long-term debt such as Treasury bonds. Amid rising interest rates and customers withdrawing their funds, the bank was forced to sell off its investments for major losses.
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The FDIC only insures customer holdings totaling $250,000, but the bank had many uninsured depositors. The stock market tumbled on Monday, with the Dow Jones Industrial Average falling by 300 points while the S&P 500 shed 1.35% and the Nasdaq composite lost 1.2%.
Regional banks, including the First Republic Bank in San Francisco, fell markedly upon the market opening on Monday. Western Alliance Bancorporation, a company based in Phoenix that disclosed over $67 billion in 2022 assets, lost more than $81 of its stock value.