Topline
The former chief of First Republic, which became the second-largest bank to fail in American history earlier this month, pointed fingers in every direction but his own for what caused his institution to unravel, leading to a strongly-worded takedown from one Democratic lawmaker.
Michael Roffler, former CEO of First Republic, testifies Wednesday.
Key Facts
Former First Republic CEO Mike Roffler, former Silicon Valley Bank CEO Greg Becker and former Signature Bank CEO Scott Shay jointly testified Wednesday before the House Financial Services panel, representing the second, third and fourth-largest failed banks in American history after each institution collapsed earlier this year.
In his opening remarks, Roffler, whose bank was the last but biggest of the trio to fail, blamed Silicon Valley and Signature for “contaminating” his firm, which he insisted had sounder financial metrics and went under despite “herculean efforts” from his bank’s leadership.
Roffler also pointed fingers at social media and media outlets’ alleged role in accelerating billions of dollars in deposit flight as well as “technological advancements” that have enabled customers to digitally withdraw cash.
Rep. Brad Sherman (D-Calif.) didn’t buy Roffler’s defense, commenting shortly after that it was one of the “three worst-run banks in America” knocked out by little more than a “modest rainstorm.”
“We shouldn’t be blaming the depositors, they didn’t take money out of solvent banks,” Sherman continued, attributing the failures to “recklessness and greed.”
Key Background
The country’s largest bank JPMorgan acquired most of First Republic’s assets and deposits May 1, ending a two-month long saga that wiped out what was the 14th-largest bank in the country at the end of last year. Shares of First Republic sank 99% after its peers in Silicon Valley and Signature failed in mid-March while billions of dollars of deposits flew out of First Republic. Largely dragging on the three failed brethren were their inability to navigate higher costs associated with elevated interest rates. In a report issued last month on Silicon Valley Bank’s failure, the Federal Reserve partially faulted the rapid spread of information and panic on social media for the collapse. Fed officials haven’t commented on First Republic’s health before it collapsed, but regulators reportedly looked into downgrading the bank to bar it from accessing the Fed’s emergency lending facilities.
Surprising Fact
Roffler was among six First Republic insiders who sold a total of $12 million worth of their stakes in the banks in the two months preceding Signature and Silicon Valley Bank’s failures. Roffler sold 7,526 shares of the stock at $130 in January, pocketing $979,000 on a stake now worth less than $3,000. The Securities and Exchange Commissions is reportedly investigating executives’ trading around this time.
Tangent
The stock of regional banks who weathered the recent storm gained big Wednesday, with Western Alliance, PacWest and Comerica each rallying more than 10% after Western Alliance revealed it recently saw a rise in deposits.
Further Reading
First Republic Bank Failure: A Timeline Of What Led To The Second-Largest Bank Collapse In U.S. History (Forbes)
First Republic Bank Insiders Dumped $12 Million In Stock Before 70% Collapse (Forbes)
Federal Reserve Says Social Media Partially At Fault For Silicon Valley Bank’s Failure (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/05/17/lawmaker-blasts-first-republic-chief-you-were-one-of-3-worst-run-banks-in-us/