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WASHINGTON — Top Democratic lawmakers are pressuring the Justice Department and the Securities and Exchange Commission to open investigations into whether officials participated in failed investigations. Silicon Valley Bankthe largest bank failure since the 2008 financial crisis, in violation of civil or criminal law.
The letter, sent Tuesday by Sens. Elizabeth Warren (D-Mass.) and Sen. Richard Blumenthal (D-Connecticut), calls for a full investigation into the FDIC takeover of failed banks and “whether Senior bank executives and other key officials involved in the failure met their statutory and regulatory responsibilities, or violated civil or criminal law.”
“This is a colossal failure of asset liability risk management,” lawmakers wrote to SEC Chairman Gary Gensler and Attorney General Merrick Garland. “However, a series of reports have revealed that key officials at the SVB exhibited a pattern of risk-taking and questionable decision-making, which could lead to instability and collapse of the bank and knock-on effects felt throughout the economy.”
SVB’s failure, which is The 16th largest bank in the country, which was snapped up after failing to adequately hedge against rising interest rates. The turning point for the company came last Wednesday, when SVB announced it had sold $21 billion worth of securities, at a loss of about $1.8 billion, and said it needed to raise $2.25 billion to meet customer withdrawal needs and fund new loans. The news sent its shares tumbling and sparked a panic-fueled wave of withdrawals from venture capitalists and other savers.SVB shares plummet 60% in one day, leading to losses More than $80 billion in bank stocks globally.
California bank regulator shuts down SVB on Friday, FDIC Set up an intermediary bank Take over the bank’s insured deposits.By Sunday, New York state bank regulators and the FDIC had signature bankwhich is the main source of loans for the cryptocurrency industry.
the letter follows joint announcement DOJ and SEC in pending investigations into SVB’s collapse. The investigation will take place at a separate preliminary stage and look into stock sales by SVB executives before the bank’s collapse.
“One of the enduring failures of the post-2008 financial crisis has been the inability or unwillingness of the Justice Department and bank regulators to hold bank executives accountable for actions that have destroyed millions of lives and lost trillions of dollars in wealth,” Warren, a wrote Blumenthal, member of the Senate Banking Committee and chairman of the Senate Judiciary Committee’s Permanent Subcommittee on Investigations. “The country’s banking regulator cannot afford to make the same mistake twice.”
Warren and Blumenthal asked the agencies to investigate whether SVB executives violated any self-dealing rules, disclosure requirements, fiduciary duty or insider trading rules prior to the collapse.
Lawmakers accused executives of giving bank founders preferential treatment, including low-interest mortgages and excessive pay and bonuses. Bank officials also lobbied Congress for exemptions from federal regulations.
According to reports, SVB employees receive annual bonus Friday—hours before the bank was seized by the FDIC.Warren also wrote in another article letter Asking Federal Reserve Chairman Jerome Powell to recuse himself from an investigation into SVB’s business practices on Tuesday, former bank CEO Gregory Becker persuaded lawmakers to exempt the bank from certain protections under the Dodd-Frank Act.
“I did not prejudge this matter, nor am I qualified to do so,” the lawmakers wrote to Gensler and Garland. “But your agency has broad investigative powers and should use it appropriately.”
— CNBC’s Natasha Turak contributed to this article.