Goldman says the US is investigating its work for Silicon Valley Bank
US authorities are investigating work Goldman Sachs did for Silicon Valley Bank in the weeks before it failed, including advising the smaller lender to sell a large portfolio of securities at a loss, according to a Goldman regulatory filing on Thursday.
Goldman said it was “cooperating with and providing information to various government agencies in connection with their inquiries and investigations” of Silicon Valley Bank, which suddenly collapsed on March 10, touching off a crisis of confidence that has led to the failure of two more regional lenders, and panic in the stock market over the fate of others.
The investigations include “the firm’s dealings with SVB in or around March 2023, when SVB engaged the firm to assist with a proposed capital raising and SVB sold the firm a portfolio of securities,” Goldman’s filing with the Securities and Exchange Commission said.
Investment bankers at Goldman advised Silicon Valley Bank executives to sell a $21 billion portfolio of U.S. government debt whose value had been greatly reduced by rising interest rates. Silicon Valley Bank did so within hours, then revealed it had taken a $1.8 billion loss on the fly. Goldman also attempted to arrange the sale of Silicon Valley Bank’s shares.
Silicon Valley Bank’s depositors pulled out billions of dollars in response to the news, a run that ended with it being seized by the Federal Deposit Insurance Corporation. Days later, another institution, Signature Bank, also collapsed, and this week regulators seized and sold First Republic Bank.
Since the crisis began, shares in a number of smaller banks have been hammered as investors try to bet on what could be the next thing to fall. The fall in the share prices of companies such as PacWest Bancorp and Western Alliance has come even as the lenders have tried to reassure investors that they are financially sound.
Goldman did not specify which regulators were conducting the investigation. In March, days after Silicon Valley Bank’s collapse, a group of Democratic lawmakers in the House of Representatives sent a letter to the heads of the SEC, the FDIC and the Justice Department, asking them to investigate Goldman Sachs’ role as an adviser to the smaller bank.
A spokeswoman for Goldman Sachs declined to comment further.