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The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from run
by bentlegen 4y ago
The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from running the same playbook? (We can debate that this the stock sale was premeditated/signaled months in advance, but the stock had already declined 80% from its 2021 peak and they surely knew about the tough liquidity position months ago — external observers drew attention to this back in January).
Note, one of the SVB executives was the former Lehman Brothers CFO in 2007, just one year prior to that institution’s collapse in 2008. What did he learn, exactly, besides how to get out in time?
https://www.foxbusiness.com/economy/silicon-valley-bank-exec-was-lehman-brothers-cfo-prior-to-2008-collapse.amp https://www.foxbusiness.com/economy/silicon-valley-bank-exec...
- fallingknife 4y agoFake news. The largest bonuses paid were $140,000 to managing directors, which is just bankerese for VP. Bonuses were already scheduled to be paid and earned for work done in 2022.
- bentlegen 4y agoAccording to Bloomberg, the CEO sold 3.6 million dollars worth of shares days before insolvency. The sale was scheduled back on January 26th. Around the same time, analysts were commenting negatively about SVB’s earnings and liquidity position. Please correct me if I’ve misinterpreted. https://www.bloomberg.com/news/articles/2023-03-10/svb-chief-sold-3-6-million-in-stock-days-before-bank-s-failure https://www.bloomberg.com/news/articles/2023-03-10/svb-chief... https://seekingalpha.com/article/4573087-svb-financial-30-percent-down-after-rally-that-makes-no-sense https://seekingalpha.com/article/4573087-svb-financial-30-pe...
- madamelic 4y agoThe very first line should tell you how little the article author knows how it works: > Greg Becker used prearranged stock-trade plan to sell shares He didn't "use a prearranged plan", a plan went into action and sold the shares. Becker had already filed paperwork to sell those shares at that specific time. To my recollection, that was 10% of his shares. Becker wasn't planning months in advance on the bank smashing into a wall precisely a few days after he sold a measly 10%.
- shjake 4y agoIt’s not unimaginable that he managed to delay the bad news from coming for a couple of days before the sale went through though.
- madamelic 4y agoI would strongly assume that require not only the cooperation of more than just him but also many people including those who had no real gain for doing that. Even if both the CEO and CFO conspired to hide this, more than just them would know about the trouble and them conspiring to do this. Those individuals would now have no reason not to whisteblow immediately. I find conspiracies, especially non-governmental, about large organizations incredibly hard to believe because of how difficult they would be to pull off.
- bentlegen 4y agoYou’re making this sound like some Ocean’s 11-level heist, and then discounting the premise you’ve created as being absurd. It doesn’t have to be that complicated. Perhaps he saw that the bank was in trouble and made a decision to sell shares when the company was at a 52 week low. His calculus could just be: “with the information I possess, this price could go a lot lower.” He may not have foreseen an insolvency event, or perhaps he knew it was a risk and he sought to hedge it. Or maybe he just sold it randomly at a low price … because.
- yeahsure22 4y agoI don’t know if the work they did in 2022 really warranted a bonus though. Doesn’t seemed to have worked out for the shareholders.
- nerdponx 4y agoI don't know if there is any regulatory authority to do this, but I think those executives should have their bonuses clawed back to pay depositors.
- stephen_g 4y agoHopefully those might be able to be clawed back?
- alostpuppy 4y agoCan that be clawed back?
- idopmstuff 4y agoHow does making the depositors whole affect any of that, though?
- mym1990 4y agoI think the argument is that if I can start a bank and depend on the government to make my depositors whole in the event of a failure, then I can act/invest in a high risk manner to get more yield, while also paying me and my executive team millions in the process. If or when things hit the fan, my depositors are paid, I am paid, and the investors are the collateral.
- deleted 4y ago[deleted]
- grey-area 4y agoSo to punish them, we need to punish depositors?!?
- bentlegen 4y agoI didn’t say that? I asked, what’s to disincentivize executives if the Fed backstopped all depositors money, now and perhaps in perpetuity? (Forgive me if I misinterpreted your position here. I have also edited this post for clarity.)
- dmix 4y agoWhich plan exactly? Yellen specifically said they have no interest in bailing out the bank itself and only care about depositors. > “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said on Face the Nation. > “But we are concerned about depositors, and we’re focused on trying to meet their needs.”
- bentlegen 4y agoI think there’s confusion in this thread, as some are advocating that depositors be made fully whole, and some are interpreting Yellen’s comments to mean that’s what will happen.
- grey-area 4y agoOther laws, which have nothing to do with depositors and how to treat them. I’m confused as to why you think these two issues are linked. I would hope these execs are prosecuted and any bonuses clawed back but that would be under the purview of a different agency (sec) not fdic, and is not an immediate concern, whereas a massive financial shock and 100s of companies closing due to lack of funds is.
- bentlegen 4y agoI’m not a lawyer, but it’s unclear to me - a random internet observer - that anyone performed anything illegal. It strikes me more as a bet gone colossally wrong, basic human mismanagement, capitalism in action, etc.
- ericb 4y agoRight, but those people are not getting bailed out. They're losing ownership of their bank!
- shjake 4y agoI think those were “just” the yearly bonuses all employees receive.
- gruez 4y ago>The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. This is highly misleading. The bonuses were calculated/awarded from last year. The stock sales were pre-scheduled.
- EFreethought 4y ago"Last year" as in the year they had no Chief Risk Officer? Got it.
- gruez 4y agoI don't see how that's relevant. The leadership team at SVB undoubtedly made a bunch of dumb decisions and they deserve to be raked over the coals for that, but there's no need to make the unsupported claim that the executives were looting the place a few days leading up to the collapse.
- EFreethought 4y agoWe can't replay history, but maybe if they had a CRO, they would not be in this mess. They had time to set bonuses, they had time over the past few years to lobby for looser regs, but apparently a CRO was just too much bother.