Fed & SEC scrutinize Goldman’s role in SVB’s final days, says WSJ

Goldman Sachs (NYSE:) is under scrutiny by the Federal Reserve and the Securities and Exchange Commission for its dual role in Silicon Valley Bank’s crisis, according to the report by The Wall Street Journal, which cited people familiar with the matter. Goldman purchased SVB’s securities portfolio and advised its capital raise during SVB’s downfall.

The Justice Department has subpoenaed Goldman, part of broader probes into SVB’s collapse, according to familiar sources. Goldman confirmed last month that it was cooperating with government investigations into its dealings with SVB.

In SVB’s final days, Goldman’s trading division bought SVB’s $21 billion debt securities portfolio, while advising SVB on capital raising. This practice is rare, except during financial stress.

Goldman advised SVB to sell securities before raising capital, according to insiders. Ex-CEO Greg Becker told the Senate Banking Committee the same thing in May. Despite potential leaks, Goldman proposed to purchase the securities, but SVB refrained from advertising the portfolio for fear of revealing its troubles. Goldman confirmed it wouldn’t advise on the sale, suggesting SVB hire an external financial adviser instead. This advice was communicated in a letter to SVB’s CFO, as per sources.

SVB announced a $1.8B loss from the sale of its securities and was seized by the Federal Deposit Insurance Corp., leading to a banking crisis. Goldman, which began selling the portfolio after buying it in March, expected to make less than $50 million from the sales, according to its spokeswoman.