STORY: The U.S. Department of Justice is investigating the collapse of Silicon Valley Bank. That’s according to a source familiar with the matter on Tuesday. This comes as scrutiny mounts over its sudden demise and regulators scramble to contain the fallout. The Securities and Exchange Commission has launched an investigation as well according to the Wall Street Journal which first reported the probes.
The Justice Department, the bank, and the SEC declined to comment. The investigation is in its early stages and may not result in allegations of wrongdoing or charges being filed, the source said.
The rapid collapse of Silicon Valley Bank and the fall of Signature Bank have left regulators racing to contain risks to the rest of the sector. On Tuesday, ratings agency Moody’s cut its outlook on the U.S. banking system to “negative” from “stable.”
Despite that, bank stocks climbed across the board on Tuesday— First Republic jumped 25-percent in afternoon trading as investors bet the crisis was ebbing… after President Joe Biden this week said all depositors in the failed banks would be protected and vowed to strengthen the banking system. .
“During the Obama-Biden administration, we put in place tough requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank law, to make sure that the crisis we saw in 2008 would not happen again. Unfortunately, the last administration rolled back some of these requirements. I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again, and to protect American jobs and small businesses.”
The Federal Reserve is also conducting a review of these recent bank failures. Democratic U.S. Senator Elizabeth Warren wants Fed Chair Jerome Powell to stay out of this, accusing him of contributing to the failures by supporting the easing of bank rules. In a statement Tuesday, Warren wrote “For the Fed’s inquiry to have credibility, Powell must publicly and immediately recuse himself from this internal review.”
Separately, Senator Warren sent a letter to the former CEO of Silicon Valley Bank Greg Becker pressing for details on the bank’s lobbying in favor of a 2018 law that eased regulations for large regional banks, which she and others have pointed to as contributing to the bank’s Friday collapse. She also asked for information regarding any stock sales by executives or bonuses paid out in the months leading up to its failure.