Progressive Senator Elizabeth Warren is asking Goldman Sachs to disclose how much money the Wall Street firm made from its “conflicting roles” with Silicon Valley Bank as the California-based lender careened toward failure.
(Bloomberg) — Progressive Senator Elizabeth Warren is asking Goldman Sachs to disclose how much money the Wall Street firm made from its “conflicting roles” with Silicon Valley Bank as the California-based lender careened toward failure.
Warren, a Massachusetts Democrat, said in a letter to Goldman CEO David Solomon that the firm appeared to have profited as a buyer of bonds from SVB days before the bank collapsed.
Tony Fratto, a Goldman spokesman, said the firm is reviewing the letter.
Justice Department officials and investigators for the Securities and Exchange Commission also have queried Goldman about its role in SVB’s attempts to raise funds, according to a person familiar with the matter. Those queries are part of a broader review of the failed bank’s final days.
SVB offloaded a $24 billion portfolio to Goldman at a loss and sought the firm’s help in raising more than $2.2 billion to cover the shortfall, according to disclosures in March. Goldman couldn’t pull off the deal and a bank run in the wake of that offering effectively doomed SVB. The New York-based bank disclosed in May that it was cooperating and providing information to the government in connection with investigations and inquiries into SVB.
“Your bank’s dual roles meant that not only were you buying SVB’s debt portfolio at a discount, you were also raking in fees as the underwriter for the failed $2.25 billion capital raise that doomed SVB,” Warren wrote. “And Goldman Sachs actually benefited further from the collapse of SVB, with the ‘turmoil’ in the market following SVB’s failure increasing the value of the discounted bond portfolio by an estimated $100 million.”
Fratto noted Goldman has said for months that it expects the proceeds from the portfolio sale to be closer to $50 million, not $100 million.
“It’s well known that banks don’t collect fees when capital raises are canceled,” Fratto said.
Warren asked Goldman to respond to her letter by July 13.
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