Dive Brief:
- Federal agencies are looking into Goldman Sachs’ business dealings with Silicon Valley Bank in the lead-up to the regional lender’s collapse in March, the New York City-based investment bank disclosed in a Securities and Exchange Commission filing Wednesday.
- Goldman, which in March was both a buyer of SVB’s bond portfolio and adviser of its failed capital raise, said it is cooperating with and providing information to various governmental bodies regarding its business with the bank before it was taken over by regulators, according to the filing.
- Disclosure of the federal probe comes as lawmakers have urged federal agencies to look into the dual role Goldman Sachs played in the days ahead of SVB’s collapse.
Dive Insight:
Facing a liquidity crunch, SVB sold Goldman Sachs a $24 billion portfolio of securities at a $1.8 billion loss in an effort to shore up capital. The lender then tapped Goldman to assist it with a $2.25 billion capital raise from General Atlantic and other investors to make up the shortfall.
The bank disclosed the loss and capital raise to investors March 8, which spooked depositors, who then tried to withdraw more than $42 billion the following day.
SVB’s takeover by federal regulators March 10 was the second-largest bank failure at the time, after Washington Mutual’s collapse in 2008.
“Goldman Sachs stands to be paid more than $100 million for its role in a bond purchase that ultimately failed to save SVB from collapse,” twenty Democratic lawmakers, led by Rep. Adam Schiff, D-CA, wrote to the U.S. Attorney General and the heads of the SEC and Federal Deposit Insurance Corp. in March. “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 advisor for SVB.”
The events at SVB set in motion a crisis of confidence in the banking sector. New York City-based Signature Bank collapsed March 13, and, most recently, regulators orchestrated the sale of First Republic Bank to JPMorgan Chase. The San Francisco-based bank’s seizure supplanted SVB as the nation’s second-largest bank failure.
In Wednesday’s filing, Goldman also disclosed it is among the underwriters named as defendants in a class-action lawsuit filed April 7, related to several SVB share offerings in 2021 and 2022.
The plaintiffs allege that offering documents contained material misstatements and omissions, and are seeking compensatory damages in unspecified amounts, Goldman said in the filing.
A spokesperson for Goldman Sachs declined Banking Dive’s request for comment.
