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Sen. John Kennedy (R-La.) said the Silicon Vally Bank (SVB) crisis could have been avoided, had the bank’s executives and federal regulators done their job on risk management.
Speaking on the Senate floor on March 15, Kennedy emphasized that SVB Bank wasn’t broke but it had a liquidity problem.
“If the management of Silicon Valley Bank had known the difference between a banking textbook and an L.L. Bean catalog, Silicon Valley Bank would have never bought securities that are so sensitive to interest rate[s] without hedging that risk, and it’s a very easy thing to do,” Kennedy said. “Honestly, it’s banking 101.”
To shore up its balance, SVB announced on March 8 that it had sold $21 billion worth of securities at a $1.75 billion loss and it would sell $2.25 billion in common equity and preferred convertible stock. The securities had lost much value after the Federal Reserve launched an aggressive campaign of interest rate increases last year.
Kennedy said he was “appalled” that SVB didn’t hedge the risk.
“I’m appalled the bankers at Silicon Valley Bank didn’t do it. I mean, it was bone-deep, down to the marrow stupid,” he said.
SVB, the nation’s 16th largest bank with about $209 billion in total assets, collapsed on March 10, after depositors rushed to withdraw money over concerns about the bank’s solvency. The Federal Deposit Insurance Corporation (FDIC) has now assumed control of the bank.
