Scott Shay, a former CEO of Signature Bank, has come under fire for reportedly seeking to blame cryptocurrency for the failure of his bank while collecting millions in bonuses and stock options. On May 16, former bank chairman Shay spoke before the Senate Banking Committee. During his testimony, Shay mentioned that the bank started accepting deposits from companies in the digital asset industry in 2018. He did add, however, that in 2022, because of market volatility, the bank considerably cut its deposits of digital assets.
During the session, Senator Cynthia Lummis, who was present, attacked Shay, accusing him of shifting the responsibility to regulators and digital assets. Lummis also pointed out that during his testimony, Shay had referred to “digital assets” ten times.
Shay, however, asserted that he had not laid the blame for the bank’s failure at the feet of digital assets. He denied having done so. Senator Elizabeth Warren, however, didn’t like this and charged Shay and Gregory Pecker, CEO of Silicon Valley Bank (SVB), with “keeping millions after recklessly crashing banks.” Warren pointed out that the law permits individuals like Shay and Pecker to give themselves tens of millions of dollars in bonuses and stock options while also allowing them to keep all of the money in the event that the banks fail.
Warren also said that she is collaborating with members of both parties in the Banking Committee to develop legislation that would allow these excessive paychecks to be recouped. She issued a warning that if the legislation is not changed, every CEO of these multibillion-dollar institutions will continue to take on risky situations and blow-up banks while making the rest of society pay the price.
Senators aren’t the only ones to condemn Shay and Pecker. According to reports, Adrienne Harris, superintendent of the New York Department of Financial Services (NYDFS), called it “ludicrous” to attribute crypto to the failure of Signature Bank. Instead, according to Harris, the circumstances that led to the demise of Signature were a “new-fashioned bank run.”
On March 12, the NYDFS seized control of Signature Bank under the pretense of defending the US economy from “system risk.” Following the failure of the crypto-friendly Silvergate Bank and SVB, the bank was the most recent failure.
Finally, it should be noted that the blame game between bank executives, digital assets, and regulators is far from over. But one thing is certain: the law needs to be changed to stop bank executives from receiving excessive salaries and taking unwarranted risks, which eventually causes banks to fail. It’s time for politicians to act in order to stop a recurrence of the collapse of Signature Bank and other bank failures.