Goldman Sachs’ job for Silicon Valley Bank is under review as part of government investigations into the tech-focused bank’s collapse in March, the Wall Street bank revealed Thursday.
Goldman he has been criticized for his dual role with SVB, both as the buyer of $21 billion in securities sold by the California lender and as an adviser on a botched capital raise for the days before SVB’s bankruptcy.
The bank said it cooperates with and provides information to “various government bodies” in connection with investigations and investigations into svb, in a filing with the Securities and Exchange Commission. This included “Goldman’s activity with SVB circa March 2023 when SVB engaged the firm to assist with a proposed capital increase and SVB sold the firm a portfolio of securities.”
In the days following the collapse of SVB, top Democrats in Congress he called for a federal investigation in Goldman’s role and urged regulators to examine whether the investment bank’s profits handling the $21 billion trade for SVB should be recovered.
Examination of Goldman’s role highlights continuing autopsy of sudden collapse of SVB, at the time second-largest US bank failure ever, with US prosecutors and SEC investigating the fault from March.
In addition to the government investigation into SVB, Goldman is among the underwriters named as defendants in a class action lawsuit filed by investors who alleged several SVB stock and debt offerings in 2021 and 2022 “contained errors and omissions substantial”.
SVB was taken over by the US government in early March following a run on the bank amid concerns over its ability to service its deposits – over 94% were uninsured – due to losses in its securities portfolio long-dated US Treasuries.
SVB hired Goldman in late February to help it strengthen its capital position as the bank prepared for a downgrade from credit rating agency Moody’s. Goldman hatched a plan to raise fresh capital for the bank and also agreed to buy part of SVB’s portfolio of Treasuries and other government-guaranteed debt.
SVB said it sold the portfolio of $21.45 billion worth of securities to Goldman “at negotiated prices” in a sale that resulted in a $1.8 billion loss for SVB. Goldman eventually abandoned the capital raise as SVB’s share price plummeted and the run on its deposits intensified.
The two transactions would be handled by separate parts of Goldman.
The collapse of SVB sparked a run on several other banks which contributed to the collapse of the First Republic and reignited fears about financial stability.
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