US Legislators Call for Probe of Goldman’s Role in SVB Failure
TEHRAN (Tasnim) – Top US Democrats in Congress have urged a federal investigation into the role Goldman Sachs played in the collapse of Silicon Valley Bank (SVB), urging regulators to examine whether the investment bank’s profits handling a $21bn trade for SVB should be repossessed.
“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 adviser for SVB,” the lawmakers wrote in a letter on Friday addressed to US attorney-general Merrick Garland, Securities and Exchange Commission chair Gary Gensler and Martin Gruenberg, chair of the Federal Deposit Insurance Corporation, the Financial Times reported.
SVB had turned to Goldman in late February to help it buttress its finances as the bank braced for a downgrade from credit rating agency Moody’s.
Goldman drew up a plan to raise new cash for the bank, and also agreed to buy part of SVB’s portfolio of Treasuries and other government-backed debt.
SVB said it had sold the portfolio of $21.45bn worth of securities to Goldman “at negotiated prices”, without elaborating, in a disclosure with the SEC. The sale generated a $1.8bn loss for SVB.
The two transactions would have been handled by separate parts of the bank. It is standard industry practice to wall off the different teams.
Goldman and SVB aborted the capital raise as the company’s share price plummeted and news reports of a bank run intensified. Customers attempted to withdraw $42bn in a day, and before its stock could open for trading last Friday, US regulators took over the bank.