U.S. Government To Investigate Goldman’s Role in Failed SVB Deal
From the desk of Jim Eccleston at ÍøÆسԹÏ
U.S. governmental agencies are set to investigate Goldman Sachs’ role in Silicon Valley Bank’s (SVB’s) last-ditched effort to raise funds in March.
Goldman Sachs is reportedly cooperating and providing information in connection with the government investigations into SVB. According to investigators, SVB sold a $24 billion portfolio to Goldman at a loss and subsequently sought Goldman’s assistance in raising at least $2.2 billion to cover the loss. However, Goldman and SVB failed to agree to a deal, which resulted in a massive bank run. Numerous lawmakers, including 20 Democratic House members, have asked the Justice Department and the Securities and Exchange Commission (SEC) to include Goldman Sachs in its preliminary investigations related to SVB’s downfall.
According to investigators, SVB sought to generate fresh capital from Goldman Sachs because SVB’s credit ratings were likely to be cut by Moody’s, which would have nearly led SVB’s debt to qualify for junk-bond status. Goldman purchased a portion of SVB’s investment portfolio with plans to flip the portfolio, which left SVB with a $1.8 billion loss. Goldman subsequently pitched a plan to sell the investment portfolio to investors, including General Atlantic and others, on March 8. However, several rival banks and investors have blamed Goldman for failing to organize a group of investors prior to the pitch, which potentially spooked the market. SVB customers rushed the bank on March 9 and withdrew nearly $42 billion, which constituted nearly a quarter of SVB’s year-end deposits.
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