Topline
The Department of Justice and Securities and Exchange Commission will reportedly investigate the sudden failure of Silicon Valley Bank, which collapsed in dramatic fashion last week, the Wall Street Journal reported.
The SEC and Department of Justice will reportedly probe the failure of Silicon Valley Bank, which … [+]
Key Facts
The two federal agencies have launched separate investigations that are both in the preliminary phases, according to the Journal, which cited sources familiar with the probe, four days after the Santa Clara, California-based bank was closed by California’s financial regulator.
Those investigations will not necessarily lead to charges against the bank—whose collapse marked the biggest bank failure since the start of the Great Recession in 2008—sources told the Journal.
Financial regulators had taken over the bank after its stocks were halted Friday, while the Federal Deposit Insurance Company announced Sunday it would make its depositors whole, even those with more money deposited than the FDIC’s threshold of $250,000, which it is required to insure.
SVB’s dramatic collapse came after the bank announced last Wednesday it had sold $21 billion in securities, losing $1.8 billion, as it sought to raise money quickly—and look for a potential buyer—as many of its big-money customers, including Silicon Valley tech companies, looked to withdraw large amounts of cash.
Chief Critic
Democrats have blamed SVB’s failure—as well as the collapse of Signature Bank over the weekend and Silvergate Capital last week—on Congressional Republicans and former President Donald Trump’s loosening of financial regulations on smaller banks in 2018. In a New York Times op-ed Monday, Sen. Elizabeth Warren (D-Mass.) argued Congress should reimpose those regulations, including risk-management standards for banks that had initially been created by the 2010 Dodd-Frank Act in response to the Great Recession. President Joe Biden also blamed Trump for the bank failure, saying in a speech this week: “Unfortunately, the last administration rolled back regulations,” while also claiming Americans can “breathe easier” and that the financial system is “safe,” after federal regulators intervened to back all SVP depositors.
Contra
In response to the pushback, Trump spokesperson Steven Cheung told Bloomberg that Democrats had tried to “gaslight the public to evade responsibility,” arguing Democrats had attempted to cover up their own “failures with desperate lies.”
Key Background
SVB’s announcement that it had lost nearly $2 billion in a sale of securities last week sparked fears among customers, who quickly withdrew their money in a massive bank run. As depositors swiftly moved their money out of the bank, fears grew that other regional banks could also become vulnerable to the same fate as SVB. Customers of New York-based Signature Bank withdrew their deposits in an abrupt mass exodus Friday, after its shares dropped by nearly 25%. The bank was shuttered by state regulators on Sunday. The failure of the regional banks has also had an effect on big banks, including the country’s 10 biggest banks, which lost more than $185 billion in market value since the day before SVB’s collapse, led by big losses at Charles Schwab and Truist Financial—though some financial experts say fears of a systemic banking meltdown are overblown.
Further Reading
What To Know About Silicon Valley Bank’s Collapse—The Biggest Bank Failure Since 2008 (Forbes)
SVB Shareholder Files First Lawsuit Against Bank Executives Over Historic Collapse (Forbes)
Justice Department, SEC Investigating Silicon Valley Bank’s Collapse (Wall Street Journal)
FDIC Will Protect All Silicon Valley Bank Deposits After Sudden Collapse, Treasury Says (Forbes)
Source: https://www.forbes.com/sites/brianbushard/2023/03/14/sec-and-doj-will-investigate-silicon-valley-banks-collapse-report-says/