August 08, 2023

Warren Raises New Questions About Goldman Sachs’ Profits and Conflicts of Interest from Silicon Valley Bank Failure

New Information from Goldman Sachs Reveals $60 Million Profit from its Dual and Conflicting Roles with SVB; Giant Bank Failed to Answer Key Questions on its Conflicts of Interest 

Text of Letter (PDF)
Goldman Sachs Response to Senator Warren’s June 2023 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 David Solomon, the CEO of Goldman Sachs (Goldman), raising new questions about Goldman’s dual and conflicting roles in Silicon Valley Bank’s collapse, which made it a $60 million profit. In June 2023, Senator Warren sent a letter to Goldman, raising serious concerns about Goldman’s conflicts of interest. In its response to Senator Warren, Goldman confirmed its dual and conflicting role and its $60 million profit from purchasing SVB’s devalued assets before the collapse, but failed to respond to many of Senator Warren’s key questions, including how it addressed conflicts of interest. Senator Warren is calling on Goldman to answer her full set of questions and additional questions about its profits from the SVB collapse and its other similar advisory roles that created conflicts of interest. 

“Your bank played dual – and conflicting – roles with SVB, which has allowed Goldman Sachs to benefit even as SVB collapsed. Goldman Sachs acted as both the buyer of SVB-held bonds and the architect of failed efforts to raise capital for the bank, raking in profits and fees even as SVB was seized by the Federal Deposit Insurance Corporation (FDIC) in a failure that cost the Federal Deposit Insurance Fund $20 billion and caused ‘macro ripples’ across the entire economy,” wrote Senator Warren. 

Goldman’s July 13, 2023 response provided important information about its role with SVB. First, the letter confirmed Goldman’s dual and conflicted role, indicating that, “In or around March 2023, SVB engaged Goldman Sachs to assist with a proposed capital raise and SVB also sought to sell the firm a portfolio of certain securities.” Goldman Sachs’ purchase of the portfolio – for $21.45 billion – was made “following arm's-length negotiations with SVB's management.” And it indicated that Goldman “expect(s) to realize a gain of approximately $60 million from the purchase and subsequent sale of the (SVB) portfolio.”

However, Senator Warren noted that Goldman failed to provide key information she sought. In response to her question about the actions Goldman took to address its conflicts of interest, it simply said, “in this case, among other things, we informed SVB in writing” of the conflict.

“I am disappointed and troubled by your failure to provide complete answers to my questions. I am therefore writing to again reiterate the following questions, which I asked in June and which were not fully answered in your July response,” concluded Senator Warren. 

Given these concerns, Senator Warren is calling on Goldman to answer the questions it failed to initially answer about its roles with SVB, and to answer a new set of questions about its $60 million in profits from the purchase and sale of the SVB portfolio, and if the firm has been involved in similar advisory roles for banks where it had conflicts of interest by August 21, 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 August 4, 2023, Senator Warren and Congresswoman Katie Porter (D-Calif.) sent a letter to Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC), urging him to act aggressively to ensure the nation’s biggest banks are accurately reporting their uninsured deposits and contributing their full and fair obligations to the Deposit Insurance Fund. The letter comes in response to a FDIC public notice that some large banks are not reporting their uninsured deposits in accordance with FDIC instructions. 
  • On June 30, 2023, Senator Warren sent a letter to Goldman, seeking answers about the firm’s conflicting roles in the March 2023 collapse of SVB – profiting as both the buyer of SVB-held bonds and as the architect of failed efforts to raise capital for the bank.
  • 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.