Topline: The Federal Deposit Insurance Corporation was forced to spend $31.6 billion to protect customers at three failed banks in early 2023. While taxpayers footed the bill, the CEOs of the three banks made out nicely, each collecting millions in compensation right before their banks folded, according to a Feb. 20 report from the Government Accountability Office.
Key facts: First Republic Bank gave CEO James Herbert II $17.8 million in compensation in 2021, according to the GAO. Silicon Valley Bank awarded CEO Greg Becker $9.9 million in 2022 and Signature Bank paid $8.7 million to Joseph DePaolo the same year.
All three CEOs had base salaries below $1.2 million but multiplied their earnings with performance-based incentives, mostly paid out as stock in the bank.
All three sold off large portions of their stock in the two years leading up to their banks’ failures, the GAO found. Between 2021 and 2023, Herbert II sold $52.9 million of his stock, DePaolo sold $39.8 million and Becker sold $30.7 million.
Herbert II and Becker were still selling stock in the first quarter of 2023, just weeks before their banks closed down. They collected $5.5 million and $3.6 million, respectively, the GAO said.
Each bank had at least four other executives earning more than $1 million per year, the GAO reported.
Background: The bank failures were the three largest in U.S. history aside from Washington Mutual’s closure in 2008.
The FDIC had to spend $31.6 billion of taxpayer money to reimburse depositors for their losses: $16.1 billion for Silicon Valley, $13 billion for First Republic and $2.5 billion for Signature.
The FDIC also reimbursed several foreign businesses. Former vice president Mike Pence wrote in an op-ed for the Daily Mail that “Americans will also be paying to guarantee the deposits of many Chinese companies that were Silicon Valley customers. We have to stop the insanity of bailing out failing businesses.”
Search all federal, state and local government salaries and vendor spending with the AI search bot, Benjamin, at OpenTheBooks.com.
Critical quote: “You were paying out bonuses until literally hours before regulators seized your assets,” Sen. Sherrod Brown told Becker during a 2023 Congressional hearing. “Workers face consequences, executives ride off into the sunset. Only in corporate boardrooms can you run your business into the ground, take the whole economy along with you and come out ahead.”
Summary: Something is amiss when a business closure hurts the government’s finances more than it does the executives running the business.
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