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March 13, 2023

Silicon Valley Bank: Accountability NOW for Failed Federal Reserve Regulators, Reckless Bank Executives & Negligent Board Members

WASHINGTON, D.C.— Dennis M. Kelleher, Co-founder, President and CEO, issued the following statement in connection with the need for immediate and meaningful accountability for the Board members and executives of Silicon Valley Bank, the regulators and supervisors at the Federal Reserve, and others who failed to prevent the disorderly collapse.

“One of the biggest injustices of the 2008 crash was the government’s unlimited, unconditional, ‘no strings’ bailouts of banks and bankers without any accountability for their greedy, reckless, and often illegal conduct.  Adding insult to injury, there was also no accountability for many others like regulators, accountants, and rating agencies who failed to do their jobs and prevent the crash and protect the jobs, homes, and savings of the American people.  The Biden administration must not repeat the mistakes of the past: it must demand accountability for bankers, regulators, and others who acted wrongly or failed to do their jobs. 

“Whether the bailouts to prevent contagion and more damage from the collapse of Silicon Valley Bank (SVB) are successful or not, the Biden administration must hold those who caused SVB’s failure or otherwise contributed to or enabled it or whose job was to prevent it accountable.  First, SVB’s executives must be sanctioned for their gross mismanagement if not reckless and illegal conduct and the Board of Directors for their deficiencies, negligence, or worse.  Executives losing their jobs is decidedly insufficient, like taking away the getaway car of a bank robber but not the money she took.  Second, the Federal Reserve must be investigated and held accountable for its failure to properly regulate and supervise the bank.  While the impact of the Fed’s interest rate policies were a key driver of the failure (discussed in detail here and here), the bank undertook enormous unreasonable risks and the Fed failed to identify and require those risks be mitigated, like a bank guard asleep on the job with headphones on during a robbery. Third, the conduct of all others, especially key gatekeepers like compliance and risk management, internal and external auditors, lawyers, bankers, fiduciaries, and others, who may have been deficient must be held accountable.

“Because SVB is a state-chartered bank member of the Federal Reserve System, the Fed is the primary regulator and supervisor of SVB, and they failed miserably here.  Given that short sellers have been circling and tweeting detailed warnings about the bank’s ‘massive unrealized losses’ for months, and with only publicly available information saw the bank was a ticking ‘time bomb sitting in plain sight.’  The Fed, with its superior inside knowledge and information, should have seen these risks and ordered SVB to take corrective action long before its failure.  Moreover, what triggered SVB to finally take some corrective action, which ignited its collapse, reportedly was the Moody’s rating agencies threatening a downgrade on or about March 1st.  The Fed has to have better information than the rating agencies yet appears to have taken little if any action.  Additionally, there have been high profile media reports specifically about SVB’s high risk activities since last fall, including in the Wall Street Journal on November 11, 2022.  That report detailed the gap between the market value of SVB’s assets and the balance sheet values as greater than the bank’s total equity. It also reviewed the many dangers associated with that risky condition, including the liquidity risks that materialized last week, and not just at SVB, but also Bank of America and Wells Fargo.

“The Fed has much more and superior knowledge, information, expertise, and access to banks than short sellers, rating agencies, and the media, yet they all appear to have done a much better job at identifying the very serious risks at SVB than the Fed.  Given the clear, multiple red flags here that no competent regulator or supervisor should have missed, there must be a full and independent investigation of the Fed’s conduct here and a detailed report of that investigation must be released to the public and the people who failed to do their jobs have to be held accountable.

“While it’s true that the deregulation law passed by the Senate almost exactly five years ago in 2018 (which the CEO of SVB personally and directly lobbied for) and the policies of the Trump administration contributed to the under-regulation of SVB, that is no excuse for the Fed’s many failures here.  That law required the Fed to dangerously deregulate banks like SVB, as Better Markets detailed and warned here, here and here, and Trump’s Fed went far beyond the law in deregulating banks like SVB, but the Fed still had the duty, mandate, and ability to fully regulate and supervise SVB in a way that would have and should have prevented the disorderly collapse of SVB.  Because Trump’s appointed Fed regulators recklessly and irresponsibly insisted in 2018 that banks “get kinder, gentler treatment,” that doesn’t mean that the Fed in 2022-2023 does apparently nothing and watch as a bank like SVB collapses and inflicts widespread damage to the financial system and economy.

“Regarding SVB’s executives and Board members, not only must their conduct mismanaging the bank be thoroughly scrutinized, but all stock sales must be investigated and evaluated in light of the bank’s disclosures and deteriorating condition.  The CEO’s sold 11% of his stock holdings for $3.6 million and the CFO reportedly sold 32% of his holdings just two weeks ago on Feb. 27th.  That was almost at the exact same time that a rating agency informed the bank a downgrade was being coming and the bank’s securities sale was being arranged, which resulted in a $2+ billion loss and an announced intent to raise capital in a stock offering, causing the stock to drop rapidly by more than 50%.  What did they know? When did they know it? Should they be in handcuffs?  Regardless of the outcome of that investigation, the compensation of SVB’s executives should be clawed back given their mismanagement of the bank, and authorities should consider barring those executives from ever serving in any capacity at a bank again, among other sanctions and penalties.”

“Personal, meaningful accountability for everyone who failed in connection with the collapse of SVB must happen quickly and visibly.  The American people expect and deserve no less.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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