The Federal Reserve and the Securities and Exchange Commission (SEC) are investigating banking giant Goldman Sachs’ involvement in advising and purchasing Silicon Valley Bank’s (SVB) securities portfolio shortly before the California lender’s collapse, individuals familiar with the situation told The Wall Street Journal.
The investigation is focused on Goldman Sachs’ role in SVB’s capital raise that took place days before its eventual failure, while the Department of Justice has also served the bank a subpoena as part of its own investigation into the collapse, according to the WSJ. The Fed and the SEC are investigating whether there were any inappropriate communications between Goldman’s investment banking division and its trading division regarding the deal. (RELATED: Goldman Sachs Under Investigation After Advising Silicon Valley Bank Before Collapse)
WASHINGTON, DC – MAY 17: (L-R) Former CEO of Silicon Valley Bank Greg Becker, co-founder and former Chairman of Signature Bank Scott Shay and co-founder and former CEO and President of First Republic Bank Michael Roffler testify during a House Financial Services Committee Hearing at the Rayburn House Office Building on May 17, 2023 in Washington, DC. The hearing was held to examine the recent failures of Silicon Valley Bank and Signature Bank. (Photo by Kevin Dietsch/Getty Images)
Goldman advised SVB to sell a $21 billion portfolio of U.S. government debt; the California lender followed the advice just hours later and eventually revealed it lost $1.8 billion in the deal, according to The New York Times. The portfolio’s value had substantially declined due to heightened interest rates and Goldman stood to obtain more than $100 million in fees for its role in the transaction.
SVB executives chose not to look for buyers other than Goldman for the portfolio due to concerns that news would spread and the market would realize the bank was in dire straits, individuals familiar with the situation told the WSJ.
Goldman purchased the portfolio on March 8, and SVB collapsed on March 10, according to the WSJ. At the time, it was the second-largest bank collapse in American history, according to CNN Business.
Goldman stated it is “cooperating with and providing information to various governmental bodies in connection with their investigations and inquiries” in a May SEC filing.
“SVB engaged Goldman Sachs to assist with a proposed capital raise and sold the firm a portfolio of securities,” a spokesperson for Goldman told the Daily Caller News Foundation. “Prior to that sale, Goldman Sachs informed SVB in writing that we would not act as their advisor on the sale, and that SVB should not rely on any advice from the bank in this regard, but instead hire a third-party financial advisor.”
“The SEC does not comment on the existence or nonexistence of a possible investigation,” an SEC spokesperson told the DCNF.
The Fed declined the DCNF’s request for comment.
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