Lawmakers Investigate If Gas Crash Was Caused by Collusion Between SVB and Its Largest Customers

If” mutual backscratching arrangements” between Silicon Valley Bank ( SVB ) and some of its largest customers contributed to the bank’s’s early collapse last month, two Democrat lawmakers are looking into the matter.

In order to find out more about their relationship with the failed bank, Sens. Elizabeth Warren ( D-MA) and Alexandria Ocasio-Cortez, D-NY, have asked some of the biggest depositors for their actions.

On April 9, Warren and Ocasio-Cortez wrote letters to the Directors of 14 significant lenders, including BlockFi, Roku, and Roblox, expressing their worries about a possible collaboration with SVB and some of the biggest venture capital firms that held” heavy, insured payments” in it.

Due to its extensive range of services, benefits, solid reputation, and willingness to offer flexible payment lines to serious clients, SVB was once the lender of opportunity for venture businessmen, startups, private equity firms.

The two politicians spoke to 14 businesses, including Sangamo Therapeutics Inc., Circle, BILL, BlockFi, Eiger, Ginkgo Bioworks Inc, LendingClub Corp, Oncorus Corp.

We are writing to find out if Silicon Valley Bank ( SVB ) has chosen to bank with and maintain sizable, uninsured deposits. The main reason for SVB’s’s demise was a loss by its top executives to take precautions against apparent danger. they penned in their email.

” These direction failures were exacerbated by a string of key regulatory and administrative errors made by regulatory officials.” However, since the bank’s’s failure, we have learned about a number of additional factors that may have accelerated its demise or created the systemic risks that ultimately compelled bank regulators to guarantee billions of dollars in deposits and caused the Deposit Insurance Fund— the largest in history — to lose$ 20 billion.

Congress Makes a Promise to Mend the American Banking System’s’s Problems

Warren stated in a press release that Silicon Valley Bank’s’s unusually cordial relationship with its clients increased the risk of disease when the bank failed.

” The British people deserve to know how these reciprocal backscratching plans came to be, who benefited from them, and what part they played in the loss of Silicon Valley Bank.”

The SVB fail, which was the second-largest bank failure in U.S. history and sparked panic throughout the world banking system, prompted Congress to act right away to address the problems that may lead to the collapse of industry.

Tech firms, bio-pharmaceutical companies, venture capitalists, and deep net-worth individuals made up SVB’s’s largest customer base. As the tech sector boom began to wane, these companies quickly emptied out their deposits.

Lenders immediately panicked when bank managers announced they were attempting to raise capital from investors after admitting the lender would lose$ 1.8 billion on long-term stocks that had fallen due to higher interest rates.

The largest lender run since the 2008 financial crisis was brought on by depositors’$ 42 billion withdrawal from SVB in a single time.

Startups and Investors Special Perks Offered by SVB

Warren and Ocasio-Cortez have expressed interest in reports that SVB” coddled” some of its biggest venture capitalists and the managers of the digital startup companies they backed with” white glove” treatment.

Congress, bank regulators, and the general public are owed an explanation for the bank’s’s excessive reliance on tech industry companies and investors, which led to an abnormally high percentage of deposits that were not insured by FDIC ] Federal Deposit Insurance Corporation ], as well as the possible role that businesses like yours may have played in hastening the$ 42 billion single-day run on SVB.