Democratic leaders in Congress have called for a federal probe into the involvement of Goldman Sachs in the downfall of Silicon Valley Bank. Additionally, they have urged regulators to investigate whether Goldman Sachs should relinquish the profits it earned from managing a $21 billion transaction for SVB.
Elected officials have penned a letter to US Attorney General Merrick Garland, Securities and Exchange Commission Chair Gary Gensler and Federal Deposit Insurance Corporation Chair Martin Gruenberg, urging an investigation into whether Goldman Sachs acted appropriately while serving as its adviser. They have requested a review to determine whether Goldman Sachs ought to profit from the demise of SVB.
The letter stated, “As Goldman Sachs is poised to profit from SVB’s failure, we strongly urge you to analyze whether Goldman Sachs operated at “arm’s length” in their role as advisor for SVB.”
The lawmakers went on to tell Garland, “We support your efforts to launch an investigation and hope that unlike 2008, we hold bank executives accountable by ensuring they are held responsible. The burden of their actions should not land on the shoulders of consumers or taxpayers.”
Rep. Adam Schiff (D-CA) led the effort to write the letter, which was also signed by 19 other Democrats representing districts in the state where Silicon Valley Bank was headquartered. These California Democrats were instrumental in recent discussions that resulted in emergency measures designed to ensure the safety of all SVB deposits and to boost public confidence in the banking system.
Goldman Sachs may earn $100M from SVB’s collapse.
I led a letter asking DOJ, SEC, and FDIC to examine any potential conflicts of interest in the firm’s role as an advisor or buyer.
All actions surrounding SVB’s collapse must be put under a microscope to protect consumers. pic.twitter.com/sZ5FMzffyi
— Adam Schiff (@RepAdamSchiff) March 17, 2023
In late February, Silicon Valley Bank sought Goldman Sachs’ assistance to strengthen its finances, as it anticipated a downgrade from Moody’s credit rating agency. Goldman Sachs developed a plan to generate fresh funds for the bank and also committed to purchasing a portion of SVB’s portfolio consisting of Treasuries and other debt backed by the government.
According to a filing with the Securities and Exchange Commission (SEC), Silicon Valley Bank confirmed that it sold a portfolio of securities worth $21.45 billion to Goldman Sachs “at negotiated prices.” However, no further details were provided. The transaction resulted in a $1.8 billion loss for SVB.
Goldman Sachs has not yet acknowledged the letter from lawmakers, and there has been no immediate response to a request for comment.
The financial sector has suffered losses of several billion dollars following the recent collapses of both Silicon Valley Bank and Signature Bank.