The Federal Reserve and the Securities and Exchange Commission are currently probing the involvement of Goldman Sachs in the purchase of Silicon Valley Bank’s (SVB) securities portfolio before the bank’s failure, while the Department of Justice has issued a subpoena as part of it’s own investigation into the collapse.
According to people familiar with the matter cited by the Wall Street Journal, the Fed and the SEC are currently requesting information pertaining to Goldman’s dual role as a purchaser of the securities portfolio and an adviser on the capital raise for SVB, particularly to determine if there was inappropriate communication between Goldman’s investment banking and trading divisions regarding the portfolio sale.
In the lead up to SVB’s failure, Goldman’s trading division purchased SVB’s $21 billion portfolio of available-for-sale debt securities at a discount to its market value, while SVB had also hired Goldman to aid in raising capital. Goldman reportedly advised SVB to sell part or all of its securities portfolio to demonstrate a need for capital before they could raise any.
Both Goldman Sachs and SVB were concerned about the bank’s financial troubles becoming public knowledge. Some sources claimed Goldman proposed buying the securities portfolio, and SVB chose not to advertise the portfolio due to fears of market rumors about their financial difficulties. In response to these claims, a Goldman spokeswoman stated that SVB was informed in writing that Goldman would not act as their adviser for the portfolio sale. They recommended that SVB should hire a third-party financial adviser.
Since purchasing the SVB securities portfolio in March, Goldman has begun selling pieces of it. A Goldman spokeswoman mentioned in early May that the bank expected to earn less than $50 million by the time the entire portfolio was sold.
Information for this story was found via the WSJ. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
