Sens. Elizabeth Warren and Richard Blumenthal demanded Tuesday that the Biden Justice Department and Securities and Exchange Commission investigate whether Silicon Valley Bank executives "violated civil or criminal law" in the lead-up to the firm's collapse, which sent shockwaves through the entire U.S. financial system.
"This was a colossal failure in asset liability risk management," the Democratic senators in a letter to SEC Chairman Gary Gensler and Attorney General Merrick Garland. The letter was first reported by CNBC on Wednesday morning.
The lawmakers pointed to recent reporting detailing how "SVB officials showed a pattern of risky and questionable decision making that may have contributed to the bank's instability and collapse and the ripple effects being felt throughout the economy."
Warren and Blumenthal asked the Biden administration to launch a probe to determine "whether senior bank executives and other key officials involved in the collapse met their statutory and regulatory responsibilities or violated civil or criminal law."
"One of the enduring failures in the aftermath of the 2008 financial crisis was the inability or unwillingness of DOJ and bank regulators to hold bank executives accountable for behavior that destroyed millions of lives and cost trillions of dollars of wealth," they wrote. "The nation's bank regulators cannot make the same mistake twice."
The fallout from SVB's collapse has brought intense scrutiny to the venture capital lender's ill-considered investment moves as well as the conduct of its top executives, who sold tens of millions of dollars worth of stock in the two years leading up to the bank's failure last week—raising questions about possible insider trading.
Greg Becker, SVB's former CEO, sold millions of dollars of shares as recently as late last month.
The bank's leadership has also come under fire for dishing out bonuses hours before federal regulators took over on Friday.
"You have nobody to blame for the failure at your bank but yourself and your fellow executives."
In a letter to Becker earlier this week, Warren—a member of the Senate Banking Committee—slammed SVB for lobbying against bank regulations in recent years and argued that "you have nobody to blame for the failure at your bank but yourself and your fellow executives."
"SVB failed—while its chief risk officer position sat vacant for eight months as its financial standing deteriorated—because it failed to address two key risks: concentration in your client base, and rising interest rates," the Massachusetts Democrat wrote. "This is a failure of 'Banking 101'—what one analyst called 'sheer incompetence.' Had SVB been subject to Dodd-Frank rules undone by [a 2018 GOP law], the bank would have been required to maintain stronger liquidity and capital requirements and conduct regular stress tests that would have required SVB to shore up its business to weather the type of stress it experienced last week."
"You lobbied for weaker rules, got what you wanted, and used this opportunity to abdicate your basic responsibilities to your clients and the public—facilitating a near-economic disaster," Warren added.
The Wall Street Journalreported Tuesday that the DOJ and SEC have both opened investigations into the SVB failure, which was the second-largest bank collapse in U.S. history.
"The separate probes are in their preliminary phases and may not lead to charges or allegations of wrongdoing," the Journalnoted. "The investigations are... examining stock sales that SVB Financial's officers made days before the bank failed."