Greg Becker, 55, grew up in the Midwestern United States. After studying finance at Indiana University, he started out in a bank in Detroit, Michigan before joining Silicon Valley Bank thirty years ago. Karl Toussain Du Wast, founder of Net Investment:
« He has a course that is both classic and ideal. He rose through the ranks in the bank and, in 2013, he took over the management of Silicon Valley Bank. In the space of ten years, he succeeded in raising the bank to 16th place among the most important American banks, with 210 billion dollars in assets under management, 175 billion in deposits. But it was above all the bank that supported all the tech companies in Silicon Valley in the United States. »
Greg Becker is known in the United States for having defended a reduction in regulations, a reduction which enabled him to take financial risks. Everything was going well until rumors sparked suspicion among the bank’s customers, amid inflation and the Federal Reserve raising interest rates to stem soaring prices. Karl Toussain Du Wast continues:
« Last week, what’s going on ? In fact, some large clients are receiving information that Greg Becker would have missed a capital increase of 2 billion dollars, which is not a lot, following the emergency sale of a large part of the bonds that the Bank had in portfolio, concomitantly with the increase in rates. I translate : the bank has bonds in its portfolio, the Fed’s key rates are rising. These bonds are getting a little less sexy than the news, so he wants to liquidate them. He needs to bail out, to re-solidify, so he wants to do a little $2 billion fundraiser. He fails. And that’s the psychological aspect of interpreting big clients who say to themselves : ”Oula, the guy is no longer able to get 2 billion recapitalization, I want to withdraw my money”. And, at that moment, snowball effect : Suddenly, 42 billion dollars were requested for withdrawal in the space of 24 hours, and we witnessed what is called in the jargon a “bank run”. This is when a bank experiences one or more massive withdrawals from its customers and is therefore no longer able to ensure liquidity. And that’s where it all started. »
To avoid contagion, US regulators immediately took matters into their own hands to secure the assets of customers of the bank and two other failing regional banks. Even Joe Biden stepped up to reassure his citizens.
« Americans can be confident that our banking system is safe. Your money is safe. First, all customers who have deposited money in these banks can be sure that they will be protected and have access to their money. Second, the managers of these banks will be fired. We need to get the full account of what happened. In my administration, no one is above the law. »
The collapse of the SVB created panic on a global scale.
Christian de Boissieu, vice-president of the Circle of economists, explains: “ Finance is a flammable sector given the fact that it is based on trust. And trust is easily lost. So, even before the bankruptcy of this Californian bank, we had financial markets that had risen too much. In Europe, in the United States, elsewhere, there was excessive speculation on the stock market, and therefore, this is what I call flammable finance. And it didn’t take much to trigger the severe corrections we are currently witnessing, including in a somewhat unfair way on European banks, because European banks, overall, are doing well. They posted high returns for 2022. But finance is globalized, so when you have a banking problem in the United States, even if it’s a regional bank, it becomes a global problem quite quickly. »
It is therefore necessary, adds Christian de Boissieu, that the Americans continue to reassure but that they also return to more banking regulations, like those which had been put in place after the financial crisis of 2008, before being relaxed later. under the Trump administration, thus contributing, in part, to the discomfiture of Greg Becker.