Well, Here’s A Surprise
Nothing to see here, move along
As Silicon Valley Bank was circling the drain, it was engaging in an orgy of loans to insiders.
The executives at this bank need to have their lives and their finances investigated with an eye toward criminal prosecutions.
I would suggest that they also add a proctologist to the team:
As Silicon Valley Bank deteriorated late last year and regulators began internally flagging flaws in its risk management, the lender opened up the credit spigot to one group: insiders.
Loans to officers, directors and principal shareholders, and their related interests, more than tripled from the third quarter last year to $219 million in the final three months of 2022, according to government data.
That’s a record dollar amount of loans issued to insiders, going back at least two decades.
The surge in loans to high-up figures may draw scrutiny as the Federal Reserve and Congress investigate the breakdown of Silicon Valley Bank, the biggest US bank collapse in more than a decade. The firm — one of three US lenders to fall this month — collapsed after investors and depositors tried to pull $42 billion in a single day and it failed to raise capital to shore up its finances.
May draw scrutiny? How about “Should”?
The Fed takes enforcement action, or refers violations to other regulators, if it finds problems with these loans, said a spokesperson for the central bank, which oversaw SVB before its collapse. A representative for the Federal Deposit Insurance Corp., the receiver for the bank, didn’t respond to a request for comment.
Before regulators seized Silicon Valley Bank on March 10, it had a reputation as the go-to lender for tech companies and the venture capital firms that seeded them. The Fed’s interest-rate hikes last year took a toll on the lender, whose liquidity was tied up in longer-term government bonds that lost value in that environment.
In its most-recent proxy statement, SVB Financial Group, the parent company of Silicon Valley Bank before its collapse, said it made loans last year to related parties including “companies in which certain of our directors or their affiliated venture funds are beneficial owners of 10% or more of the equity securities of such companies.”
The bank issued the loans in the normal course of business, and with similar interest rates and collateral as other customers received around the same time, according to the filing. Still, loans in other categories such as real estate and commercial grew at a much slower rate — just over 3% — than those issued to insiders, according to data in separate government reports.
I want to see some prosecutions.
In fact, I think that this should be a jumping off point to a REALLY a deep dive into the finances of all of Silicon Valley.
There is a lot of slime under a lot of rocks there.