Goldman Sachs is currently under intense scrutiny from the Federal Reserve and the Securities and Exchange Commission (SEC) over its involvement in buying Silicon Valley Bank’s stock portfolio before the collapse of the bank, the Wall Street Journal said. reportedciting sources familiar with the matter.
Breaking: Goldman Sachs is under investigation by the Federal Reserve and the Securities and Exchange Commission over its role in the last days of Silicon Valley Bank https://t.co/L7buF8TfvX
— The Wall Street Journal (@WSJ) June 15, 2023
According to the report, the two agencies are investigating the actions of Goldman Sachs during its fundraising failure before the collapse of SVB. The Justice Department also reportedly issued a subpoena to Goldman Sachs as part of its investigation into SVB.
Insiders also reportedly reported that the Federal Reserve and the SEC are particularly interested in obtaining documents relating to Goldman Sachs’ dual role as buyer of SVB’s securities portfolio and adviser on the bank’s fundraising. Agencies are reportedly investigating whether there were any improper communications between Goldman’s investment banking division and its trading division regarding the sale of the portfolio.
In response, Goldman shared that he is “cooperate with and provide information to various government agencies in connection with their inquiries and investigations into SVB, including the Company’s business with SVB on or about March 2023.”
In the final days leading up to SVB’s collapse, Goldman Sachs was reportedly hired to help the bank raise capital. At the same time, its trading division purchased SVB’s “$21 billion portfolio of available-for-sale debt securities at a discount.” As the WSJ has reported, bankers and financial lawyers consider it rare for banks to simultaneously act as both adviser and purchaser of a company’s assets, except in times of financial difficulty.
Sources familiar with the matter also reportedly revealed that Goldman advised SVB executives to “sell some or all of its securities portfolio” before raising capital to demonstrate the need for funding. This advice was reiterated by Greg Becker, the former CEO of SVB, during his testimony before the Senate Banking Committee.
In response to the allegations, a Goldman Sachs spokeswoman said:
(Goldman) “advised SVB in writing that we would not be acting as an adviser to the sale, and that SVB should not rely on the bank’s advice in this regard, but rather engage a third-party financial adviser.”
Related: ‘How Did It Happen’ – Powell Says Fed Puzzled By SVB Collapse
On March 10, California regulators took the unprecedented step of shutting down Silicon Valley Bank, a top financial lender that caters to venture capitalists and tech companies. Prior to its closure, SVB was the 16th largest bank in the United States, with assets of over $212 billion.
Following this incident, on March 17, SVB Financial Group filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court. The voluntary petition was intended to facilitate a court-supervised reorganization process to preserve the value of the company.
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