Goldman Sachs’ Advisory Work With SVB Probed by Feds

Federal authorities are investigating Goldman Sachs’ work with Silicon Valley Bank ahead of its collapse.

Goldman Sachs revealed the probe in a regulatory filing Thursday (May 4) with the Securities and Exchange Commission (SEC), saying it was cooperating with and giving information to “various governmental bodies” as they look into the downfall of Silicon Valley Bank (SVB). 

The filing said that that investigation includes Goldman’s work with the bank “in or around March 2023, when SVB engaged the firm to assist with a proposed capital raise and SVB sold the firm a portfolio of securities.”

In the week after SVB folded and was taken over by the Federal Deposit Insurance Corp. (FDIC), members of California’s congressional delegation led by Democrat Adam Schiff wrote to Attorney General Merrick Garland, SEC Chairman Gary Gensler, and FDIC Chair Martin Gruenberg, asking for an investigation into the role Goldman Sachs played in SVB’s failure.

The letter followed SVB’s revelation that Goldman Sachs had served as an adviser to SVB as it tried to raise funds to avoid closure and asked the DOJ, SEC, and FDIC to determine whether Goldman operated at “arm’s length” in its advisory capacity.

The SEC filing also says Goldman is one of the underwriters named as defendants in an investor lawsuit that claims numerous 2021 and 2022 stock and debt offerings from SVB “contained material misstatements and omissions.”

The investigation of Goldman’s role in SVB’s downfall underlines the ongoing effects of the bank’s collapse, which triggered a banking crisis that is still unfolding.

For example, this week saw troubled lender First Republic Bank being sold to J.P. Morgan Chase after it, too, was seized by the FDIC.

Since then, shares of other regional banks began to fall as well, among them PacWest Bancorp, which is reportedly considering a sale, a breakup or a capital raise, per a Bloomberg News story Wednesday (May 3) evening.

That report notes that not many potential buyers are interested in snapping up the entire bank, and a buyer could have to suffer a loss marking down some of PacWest loans. Those factors would complicate attempts to make an outright sale.

PacWest lost 85% of its value in the wake of the banking crisis and tried to reassure investors Thursday as its stock continued to fall.

“The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news,” PacWest said. “Our cash and available liquidity remains solid and exceeded our uninsured deposits.”