Big problem: Customers are seen in front of SVB in Santa Clara, California. Michael Roberts, a finance professor at the University of Pennsylvania’s Wharton School, says the future of the bank is unclear, even with the help of seasoned executives. — Reuters
WASHINGTON: Franklin Raines has a name for battle-tested Wall Street figures who get brought in to clean up the nastiest problems at the biggest institutions: “mega finance veterans”.
He would know. Raines ran Fannie Mae for years, leaving under pressure before the home-loan giant collapsed in 2008 and was taken over by the Federal Housing Finance Agency. When US officials tapped Herb Allison as chief executive officer (CEO), Raines dropped him a line.
“I wished him luck,” Raines recalled in an interview. “It can be a lonely time.”
On Monday, the Federal Deposit Insurance Corp (FDIC) tapped one of their successors at Fannie Mae, Tim Mayopoulos, 64, to run Silicon Valley Bank (SVB) Financial Group’s bridge bank after the firm collapsed last week in the second-biggest banking failure in US history.
“I would be very assured that someone like Mayopoulos, who has shown a steady hand, is going to be in charge of this,” Raines said. “And not someone who’s trying to stir the pot and continue the chaos.”
The idea is that the gravitas, humility, experience and steadiness of “mega” veterans will help restore the faith of furious clients and calm jittery investors.
The FDIC also picked Bill Kosturos to work with Mayopoulos as chief restructuring officer. Kosturos held the same title at savings-and-loan giant Washington Mutual after it imploded in 2008, the only US bank failure bigger than SVB’s.
One of Mayopoulos’s first actions as CEO was to address SVB clients.
“I come to this experience with humility” and “experience in these kinds of situations,” he wrote, referring to his work at Fannie Mae.
“I am very proud of work we did there to restore the company to profitability and to stabilise the housing finance system in a period of unprecedented challenge.”
The FDIC declined to make Mayopoulos available for an interview, and Kosturos didn’t reply to messages seeking comment.
Michael Roberts, a finance professor at the University of Pennsylvania’s Wharton School, said the future of SVB is unclear, even with the help of seasoned executives.
Is Mayopoulos the right person for the job?
“We’ll see,” Roberts said. “He certainly has experience in the space.” Then again, he added, FDIC takeovers don’t leave room for much creativity or personality. “He’s hardly doing this alone.”
Kosturos, a managing director at consulting firm Alvarez & Marsal, is known as a fixer.
He’s spent decades immersed in catastrophes that would send most people running: His resume includes Bed, Bath & Beyond Inc, Toys “R” Us and Spiegel Inc.
He was paid US$100,000 (RM450,500) a month after being hired in 2003 to turn around Spiegel, the parent of Eddie Bauer stores.
“We’re at the front end of what will be a very thorough business analysis,” he said as the firm filed for bankruptcy. The stakes were higher at WaMu.
“There was only US$900mil (RM4.05bil) in this entire estate that was undisputed,” he testified in 2010 at a bankruptcy hearing in Wilmington, Delaware. “Everything else was a fight.”
Mayopoulos, most recently president of mortgage-lending platform Blend Labs Inc, previously worked as general counsel for Bank of America Corp, which dismissed him in 2008 and handed the job to Brian Moynihan, who’s now the CEO.
A year later, he told the House Committee on Oversight and Government Reform that Bank of America didn’t even allow him to gather his personal items.
“I had never been fired from any job and I had never heard of the general counsel of a major company being summarily dismissed for no apparent reason and with no explanation,” Mayopoulos testified.
Andrew Bon Salle, who worked for Mayopoulos at Fannie Mae, said he made things “look easy” during that tumultuous period and that he’s a “perfect fit” for SVB. — Bloomberg
