© Reuters. U.S. Senator Elizabeth Warren (D-MA) questions witnesses during a Senate Banking, Housing, and Urban Affairs Committee hearing in the wake of recent bank failures, on Capitol Hill in Washington, U.S., May 18, 2023. REUTERS/Evelyn Hockstein/File Photo
(Reuters) – U.S. Senator Elizabeth Warren has questioned Goldman Sachs (NYSE:)’ role in the failure of Silicon Valley Bank (SVB) and the profits it allegedly made in the process.
“Goldman Sachs, serving as both the buyer of SVB-held bonds and the architect of failed efforts to raise capital for the bank, raked in profits and fees even as SVB was seized by the Federal Deposit Insurance Corporation (FDIC),” Warren said in a June 29 letter to the Wall Street bank.
The letter said Goldman Sachs benefited further as market turmoil following SVB’s failure increased the value of the discounted bond portfolio by an estimated $100 million.
Goldman acquired a bond portfolio on which SVB booked a $1.8 billion loss, a transaction that preceded a failed share sale by the lender for which the Wall Street bank was an underwriter.
“We’re reviewing the letter. But it’s well known that banks don’t collect fees when capital raises are canceled,” said Tony Fratto, a spokesman for Goldman Sachs.
He reiterated that Goldman expects proceeds from the SVB portfolio sale to be closer to $50 million, and not $100 million.
SVB Financial Group on March 17 filed for a court-supervised reorganization under Chapter 11 bankruptcy protection to seek buyers for its assets, days after its former unit, Silicon Valley Bank, was taken over by U.S. regulators.
Goldman in May disclosed that it was among the underwriters named as defendants in a securities class action lawsuit related to several SVB Financial Group share offerings in 2021 and 2022.
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