Greg Becker and two of his most senior deputies, CFO Daniel Beck and President Michael Deshno, were at the head of Bank Silicon Valley (SVB) as the bank rode a wave of low interest rates and easy money policies.
Last year, when the world changed and the Federal Reserve began raising interest rates at the fastest rate in decades, they all but ignored it, betting that interest rates would come back down and focusing on the technology industry, characterized by rapid growth and rapid crashes.
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Becker, 55, has served as the bank’s CEO since 2011, turning SVB into one of the 20 largest US banks. While other banks backed away from anything that looked like risk after the financial crisis, SVB was willing to accept new startups that had great potential but little profit.
Senior executives issued optimistic forecasts more suited to tech entrepreneurs than bankers. They also often asked these companies to centralize all their banking at SVB.
“I often tell people that I work in the coolest banking job in the world,” Becker said in a 2019 podcast. “At Silicon Valley Bank, we work with the coolest companies in the entire world.”
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For many years, this strategy paid off. Deposits jumped in 2021 by 86% and the bank’s stock increased by 75%, after increasing by 54% in 2020.
Short bets on the stock increased last year to 6.7%
But there were also skeptics, some of whom feared the bank’s rapid growth, and began betting against its stock. A year ago, 1.4% of the company’s shares were shorted by bearish investors, but by the end of last year, that figure had risen to 6.7%, according to S3 Partners, which tracks short sales data. Last year, the bank’s shares fell by 66%. This year, the bank’s shares fell by 54% until Thursday, their last trading day.
For most of last year, the bank did not have a risk manager, after Laura Izurieta retired from the position in April and her successor was not announced until January. Izurieta’s departure was revealed by the bank for the first time last week.
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Last year was a tough one for tech stocks. The Federal Reserve raised interest rates sharply, making investors less willing to take risks. Crypto companies collapsed, the IPO market dried up and the tech-laden Nasdaq index fell 33%, its biggest drop since the 2008 financial crisis.
But SVB continued to bet on interest rates going down. Last year, the bank ended, or allowed it to expire, more than $14 billion worth of interest hedges in securities during the year, according to the bank’s year-end report. The bank actually reported no new hedging against interest rate hikes in its huge bond portfolio at the end of 2022.
In the middle of last year, the bank announced in a presentation to investors that it is “shifting the focus to managing sensitivity arising from an environment of falling interest rates”, or in other words, protecting itself against a situation where interest rates will fall again.
Becker, Beck and Dashno have not spoken publicly since the collapse of the bank. The three could not be reached for comment on Monday.
At a conference last week, three days before his bank collapsed, Becker said now was “a great time to start a company.”
“You can look at agricultural technology, financial technology, cleantech, medical technology or personalized medicine,” Becker said at the conference. “You can literally go through all the fields. There are exciting things in each of the categories.”
At another conference last month, CFO Beck said SVB’s focus on technology, health care and the life sciences industry did not create a risk of overconcentration, noting the different expertise of clients in those areas and the bank’s business in foreign countries.
Becker joined SVB in 1993 as a loan manager when he was in his 20s. Beck, 50 today, is the relatively new senior manager, having joined SVB as CFO in 2017. Deshno, 55 years old, joined the board in the middle of the first decade of the century.
Deshno worked as chief financial officer before being appointed president of the bank. In his role, he also oversaw a $3 billion investment arm called SVB Capital, the bank said in 2017.
Beck replaced Dashno as chief financial officer that year, and was an outside hire, having previously worked at Bancwest Corp, also where he served as chief financial officer. He was a sponsor manager at SVB’s employee resource group for black workers, according to his biography on the company’s website.
At Bank of the West, Beck led the first time the bank was subject to the Federal Reserve’s stress test, according to his biography. His career also included roles at Wells Fargo, Freddie Mac, E*Trade and Deloitte.
Becker grew up in Northeast Indiana, where his father ran a business supply company, according to Investor’s Business Daily.
After graduating from Indiana University, he took an entry-level position at a bank in Detroit. At that bank, he was eventually asked to transfer to the California branch, from where he was recruited to SVB, according to news reports about him.
He initially worked with the bank’s software clients in Palo Alto, California, before moving to Boulder, Colorado, where he established an office of SVB in 1996. Becker was appointed president of Silicon Valley Bank in 2008 and CEO three years later.
An employee of the bank described Becker as a banker who works par excellence on the basis of personal relationships with customers, and as a person who is also loved by the employees within the bank. He had a vision for the future of the technology industry and knew how to speak its language – and was willing to bet on his customers. “He was a CEO who worked for the audience he was performing in front of,” said the same employee.
In 2015, Becker told the Senate Banking Committee that there was room for easier regulation of smaller banks like his. Becker said his bank weathered the financial crisis with high credit quality, increasing the amount of loans it distributed by nearly 70% between 2007 and 2011. He told lawmakers that his bank did not pose a systemic risk.
“Because SVB’s business model and risk profile do not constitute a systemic risk, enforcement of the Dodd-Frank requirements, intended for the largest bank holding companies, could place too heavy a burden on us, with minimal regulatory benefits in return,” Becker wrote.
Becker and Beck sold shares a week before the collapse
This month, the bank revealed the salary packages in 2022 of the three people: $9.9 million for Becker, $4.6 million for Dashno and $3.6 million for Beck, with the majority given as shares.
In the report, the SVB’s remuneration committee said Becker and Beck’s bonuses were reduced to account for “pressures on the balance sheet resulting from declining deposits and the market environment.” On the other hand, both men were praised for their “strong leadership” in risk management.
Disclosures produced by the bank show that Becker and Beck both sold shares a week before the bank collapsed. Becker exercised options on 12,451 shares on February 27 and sold them that day, receiving about $2.3 million.
Beck sold shares worth a little more than $575,000 on February 27, about a third of his holdings in the bank.
Both sales were made under 10b5-1 plans filed 30 days earlier. These plans allow company employees to predetermine sales of shares to avoid suspicions of trading based on information that is not publicly available. The SEC (U.S. Securities and Exchange Commission) examined this method of sale and proposed new rules, including the extension of the 30-day period before the sale to 90 days.
Becker is an avid cyclist. “Living in Northern California and living on the peninsula, I think that’s where the best cycling opportunities in the world are,” he said at a conference last week, when someone asked him what he likes to do when he’s not at work.
SVB has been one of the sponsors of a group of Silicon Valley cyclists since 2006. Becker would occasionally join the cyclists, sometimes bringing venture capitalists with him, said Linda Jackson, the group’s founder.
“He’s strong and competitive,” Jackson said. “It is very strong on the plains and on the downhill slopes.” Now, with the collapse of SVB, the team of riders began to look for a new sponsor.
Meghan Bobrovsky, Joseph de Avila, Gregory Zuckerman, Eliza Chow and Elliott Brown contributed to this article.