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Top Senate Democrats pressure DOJ, SEC to investigate whether Silicon Valley bank executives broke any laws

PoliticsWorld PoliticsTop Senate Democrats pressure DOJ, SEC to investigate whether Silicon Valley bank executives broke any laws
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Avishek Das | Lightrocket | Getty Images

WASHINGTON — Top Democratic lawmakers pressured the Justice Department and the Securities and Exchange Commission to investigate whether officials involved in the failure Silicon Valley BankThe biggest bank collapse since the 2008 financial crisis, violated civil or criminal law.

The letter, sent Tuesday by Sens. Elizabeth Warren, D-Mass., and Richard Blumenthal, D-Conn., deals with the failed bank’s takeover of the Federal Deposit Insurance Corp. as well as “whether senior bank executives and other key officials involved in the collapse fulfilled their statutory and has met regulatory responsibilities or violated civil or criminal law.”

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“This was a colossal failure in asset liability risk management,” the lawmakers wrote to SEC Chairman Gary Gensler and Attorney General Merrick Garland. “However, a series of reports have revealed that key executives at SVB have shown a pattern of risky and questionable decision-making that may have contributed to the bank’s instability and collapse, and the ripple effects may be felt throughout the economy.” Is.”

failure of SVB, which was Country’s 16th largest bank, was discounted after failing to adequately hedge against rising interest rates. The company’s tipping point came last Wednesday, when SVB announced it had sold $21 billion worth of its securities at a loss of roughly $1.8 billion and said it was trying to meet customers’ withdrawal needs and create new ones. It needs to raise $2.25 billion to fund the loan. That news plunged its share price and triggered a panic-induced wave of withdrawals from VCs and other depositors. Within a day, SVB stock had fallen 60% and caused losses Over $80 Billion in Bank Shares Globally.

California bank regulators shut down SVB and the FDIC on Friday set up an intermediary bank To take possession of the insured deposits of the bank. As of Sunday, New York State Bank regulators and the FDIC did just that. signature bankWhich was a major source of lending to the cryptocurrency industry.

came on the heels of the letter A joint declaration Regarding the pending investigation of the SVB failure by the Department of Justice and the SEC. The inquiries will be at separate and preliminary stages and will focus on stock sales carried out by SVB officials before the collapse of the bank.

“One of the enduring failures following the 2008 financial crisis was the inability or unwillingness of the DOJ and bank regulators to hold bank executives accountable for the behavior that destroyed millions of lives and cost them trillions of dollars in assets,” Warren , a member of the Senate Banking Committee, and Blumenthal, who chairs the Permanent Subcommittee on Investigations for the Senate Judiciary Committee, wrote. “The nation’s bank regulators can’t make the same mistake twice.”

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Warren and Blumenthal asked the agencies to look into whether SVB executives violated any self-dealing rules, disclosure requirements, fiduciary duties or insider trading rules prior to the collapse.

SEC Chairman Gary Gensler reiterated at the top of an agency meeting on Wednesday that his staff is committed to finding and prosecuting any “misconduct,” referring to “the events of the past week” without mentioning specific companies or executives. whether the focus was on investors, capital formation, or the market more broadly.”

Lawmakers accused SVB officials of giving the bank’s founders preferential treatment, including low-interest mortgage loans and large salaries and bonuses. Bank executives also lobbied Congress for relaxation of federal oversight rules.

Alleged SVB employee received annual bonus on a Friday – just hours before the bank was seized by the FDIC. Warren also wrote in a separate Letter On Tuesday, after Federal Reserve Chairman Jerome Powell asked to recuse himself from an investigation into SVB’s business practices, former bank CEO Gregory Baker persuaded lawmakers to free the bank from some protections under the Dodd-Frank Act.

“I am not prejudicial to the matter, and am in no position to do so,” wrote lawmakers to Gensler and Garland. “But your agencies have wide investigative powers and they should use it appropriately.”

, of cnbc Natasha Turk contributed to this article.

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