Top Senate Democrats press DOJ, SEC to investigate whether Silicon Valley Bank executives broke laws

WASHINGTON — Top Democratic lawmakers pressed the Justice Department and the Securities and Exchange Commission to unfastened a probe into whether officials progressive successful the nonaccomplishment of Silicon Valley Bank, the largest slope illness since the 2008 fiscal crisis, violated civilian oregon transgression law.

The letter, sent Tuesday by Sens. Elizabeth Warren, D-Mass. and Richard Blumenthal, D-Conn., asks for a broad probe into the Federal Deposit Insurance Corporation's takeover of the failing bank, on with "whether elder slope executives and different cardinal officials progressive successful the illness met their statutory and regulatory responsibilities oregon violated civilian oregon transgression law."

"This was a colossal nonaccomplishment successful plus liability hazard management," the lawmakers wrote to SEC Chairman Gary Gensler and Attorney General Merrick Garland. "However, a bid of reports revealed that cardinal SVB officials showed a signifier of risky and questionable determination making that whitethorn person contributed to the bank's instability and illness and the ripple effects being felt passim the economy."

The nonaccomplishment of SVB, which was the nation's 16th largest bank, was preempted aft it failed to adequately hedge against rising involvement rates. The company's tipping constituent came past Wednesday, erstwhile SVB announced it had sold $21 cardinal worthy of its securities astatine a astir $1.8 cardinal nonaccomplishment and said it needed to rise $2.25 cardinal to conscionable clients' withdrawal needs and money caller lending. That quality sent its banal terms plunging and triggered a panic-induced question of withdrawals from VCs and different depositors. Within a day, SVB banal had tanked 60% and led to a nonaccomplishment of more than $80 cardinal successful slope shares globally.

California slope regulators shuttered SVB connected Friday and the FDIC set up an intermediary slope to instrumentality implicit the bank's insured deposits. By Sunday, New York authorities slope regulators and the FDIC did the aforesaid to Signature Bank, which was a large root of lending for the cryptocurrency industry.

The missive came connected the heels of a joint announcement by the Justice Department and the SEC astir the pending probe into the SVB failure. The enquiry volition instrumentality spot successful abstracted and preliminary phases and look into banal income that SVB executives conducted up of the bank's collapse.

"One of the enduring failures successful the aftermath of the 2008 fiscal situation was the inability oregon unwillingness of DOJ and slope regulators to clasp slope executives accountable for behaviour that destroyed millions of lives and outgo trillions of dollars of wealth," Warren, a subordinate of the Senate Banking Committee, and Blumenthal, who chairs the Permanent Subcommittee connected Investigations for the Senate Judiciary Committee, wrote. "The nation's slope regulators cannot marque the aforesaid mistake twice."

Warren and Blumenthal asked the agencies to look into into whether SVB executives violated immoderate self-dealing rules, disclosure requirements, fiduciary duties oregon insider trading rules earlier the collapse.

The lawmakers accused the executives of giving preferential attraction to the bank's founders, including low-interest owe loans and oversized wage and bonuses. Bank officials besides lobbied Congress for exemptions to national oversight regulations.

SVB employees reportedly received yearly bonuses connected Friday — hours earlier the slope was seized by the FDIC. Warren besides wrote successful a abstracted letter connected Tuesday asking Federal Reserve Chair Jerome Powell to recuse himself from a probe into SVB's concern practices that erstwhile slope CEO Gregory Becker convinced lawmakers to absolve the slope from definite protections nether the Dodd-Frank Act.

"I americium not prejudging this matter, and americium not successful presumption to bash so," the lawmakers wrote to Gensler and Garland. "But your agencies person extended investigative authorization and should usage it appropriately."

CNBC's Natasha Turak contributed to this article.