June 30, 2023

Warren Questions Goldman Sachs’ Profiting from Silicon Valley Bank Failure

Goldman Played Conflicting Roles, Profiting from Buying SVB-Held Bonds and Raising Capital for SVB That Contributed to Run on the Bank

Text of Letter (PDF)

Washington, D.C. – United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Goldman Sachs (Goldman), seeking answers about the firm’s conflicting roles in the March 2023 collapse of Silicon Valley Bank (SVB) – profiting as both the buyer of SVB-held bonds and as the architect of failed efforts to raise capital for the bank. Senator Warren’s letter comes as federal regulators investigate Goldman’s role in this crisis. 

“Goldman(’s) profit(ing) as the economy suffered – is reminiscent of the company’s behavior during the 2008 financial crisis, when it profited both from selling mortgage-backed securities and from placing bets against them. While I am glad that Goldman Sachs is cooperating with federal investigations into its role,  you owe the American public full transparency regarding how your bank benefited from this crisis,” wrote Senator Warren. 

In the letter, Senator Warren notes that Goldman appeared to have profited at nearly every stage of SVB’s collapse. On March 8, 2023, on Goldman’s recommendation, SVB sold Goldman a $24 billion debt portfolio at a $1.8 billion loss. Goldman, in its role as an advisor to SVB, attempted to line up a $2.25 billion sale of SVB stock that would provide SVB with the capital it needed to stay solvent.  However, news of the sale of SVB’s portfolio to Goldman instead sparked panic among investors and “set in motion the failure of SVB.”  Within days, the stock sale was canceled, SVB customers sought to withdraw more than $40 billion in deposits from SVB, and regulators seized the bank, marking one of the largest bank failures in U.S. history – costing the Federal Deposit Insurance Fund an estimated $20 billion.

“Your bank’s dual roles meant that not only were you buying SVB’s debt portfolio at a discount, you were also raking in fees as the underwriter for the failed $2.25 billion capital raise that doomed SVB. And Goldman Sachs actually benefited further from the collapse of SVB, with the ‘turmoil’ in the market following SVB’s failure increasing the value of the discounted bond portfolio by an estimated $100 million,” continued Senator Warren. 

Given these serious concerns, Senator Warren is calling on Goldman Sachs to answer a set of detailed questions about its role in SVB’s portfolio sale and as an advisor on SVB’s attempt to raise capital, and any actions taken to prevent conflicts of interest by July 13, 2023. 

Senator Warren is a leading voice on the financial system, holding bank executives accountable for gross mismanagement and advocating for critical regulations to protect consumers, the financial system, and the economy:

  • On June 21, 2023, at an executive session of the BHUA Committee to consider the FEND Off Fentanyl Act and RECOUP Act, Senator expressed support for the RECOUP Act as a reasonable compromise that significantly improves the oversight of bank executives that blow up their banks and will make the banking system safer – and called on every member of the Senate and House to support the legislation. 
  • On June 1, 2023, Senators Warren , J.D. Vance (R-Ohio), Bob Menendez (D-N.J.), Katie Britt (R-Ala.), Mark Warner (D-Va.), Kevin Cramer (R-N.D.), Chris Van Hollen (D-Md.), Tina Smith (D-Minn.), Raphael Warnock (D-Ga.), and John Fetterman (D-Pa.), all members of the Senate BHUA Committee, joined Senators Catherine Cortez Masto (D-Nev.), Josh Hawley (R-Mo.), and Mike Braun (R-Ind.), to update their original legislation and introduce the Failed Bank Executives Clawback Act – bipartisan legislation that would require federal regulators to claw back up to three years of compensation received by big bank executives, board members, controlling shareholders, and other key decision-makers in the event of a failure or resolution.
  • On May 16, 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, Senator Warren blasted the former CEOs of SVB and Signature Bank (Signature) for lobbying Congress to weaken banking regulations, loading up their banks with risk, ignoring regulators’ warnings, and crashing their banks – all while keeping their multi-million dollar paychecks.
  • On May 4, 2023, at a BHUA hearing, Senator Warren highlighted the importance of passing strong legislation to provide the Federal Deposit Insurance Corporation (FDIC) with the necessary authority to claw back executive pay whenever banks collapse, regardless of the specific process the FDIC uses to pick up the pieces.
  • On May 4, 2023, Senator Warren sent a letter to First Republic Bank’s former CEO Michael J. Roffler, inquiring about his and First Republican executives’ mismanagement of the bank, their lobbying for weaker rules, and their compensation and stock sales.
  • On March 22, 2023, Senators Warren and Rick Scott (R-Fla.) introduced bipartisan legislation to require a presidentially-appointed and Senate-confirmed Inspector General to the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
  • On March 22, 2023, Senators Warren, Tammy Duckworth (D-Ill.), Richard Blumenthal (D-Conn.), Bernie Sanders (I-Vt.), Jack Reed (D-R.I.), Mazie Hirono (D-Hawaii), Ed Markey (D-Mass.), Angus King (I-Maine), Sheldon Whitehouse (D-R.I.), Tina Smith (D-Minn.), Chris Van Hollen (D-Md.), and Brian Schatz (D-Hawaii) sent a letter to the Vice Chair for Supervision of the Federal Reserve Michael Barr, calling on him to exercise the Fed’s authority to apply stronger regulation and supervision to banks with assets totaling $100 to $250 billion.
  • On March 19, 2023, Senator Warren sent a letter to the Inspectors General at the Department of Treasury, the FDIC, and the Fed, urging them to immediately open a thorough, independent investigation of the causes of the bank management and regulatory and supervisory problems that resulted in this month’s failure of Silicon Valley Bank and Signature Bank and deliver preliminary results to Congress and the public within 30 days. 
  • On March 14, 2023, Senator Warren and Representative Katie Porter (D-Calif.) led dozens of Democratic lawmakers to introduce the Secure Viable Banking Act, legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 following the collapse of SVB and Signature Bank. In 2018, Senator Warren was outspoken about the dangers of passing the Economic Growth, Regulatory Relief, and Consumer Protection Act, which reduced critical oversight and capital requirements for large banks. 
  • On March 14, 2023, Senator Warren sent a letter to ex-SVB CEO Greg Becker, asking for answers about his and SVB lobbyists’ efforts to roll back Dodd-Frank rules prior to the collapse of the bank.
  • On March 14, 2023, Senator Warren called on Federal Reserve Chair Jay Powell to recuse himself from the Federal Reserve’s announced internal review of its supervision and regulation of SVB.
  • On March 13, 2023, Senator Warren published an op-ed in the New York Times calling Congress and federal regulators to strengthen weakened rules to avoid another crisis, intensify bank oversight, reform deposit insurance, and hold SVB executives accountable for any malfeasance or mismanagement that led to its failure.
  • On March 10, 2023, Senator Warren released a statement following the collapse of SVB.