Two lawmakers are asking Silicon Valley Bank depositors if their executives received personal perks from the bank.
In a letter dated Sunday (April 9) and sent to the companies, Sen. Elizabeth Warren, D-Mass., and Rep. Alexandria Ocasio-Cortez, D-N.Y., asked about recent media reports that executives received “coddling” and “white-glove treatment” from the now-failed bank.
“Silicon Valley Bank’s unusually cozy relationship with its clients increased the threat of contagion when the bank went under,” Warren said in a Monday (April 10) press release. “The American people deserve to know how these mutual backscratching arrangements developed, who benefited from them, and what role they played in Silicon Valley Bank’s failure.”
The lawmakers said in the letter that most of the bank’s deposits were not insured by the Federal Deposit Insurance Corp. (FDIC), that this increased the risk of contagion throughout the banking system and that the public deserves an explanation of why the bank was so reliant on a single industry — tech firms and their investors.
“If these deposits were made by company executives and allowed by corporate boards in exchange for personal perks, that behavior raises potential concerns about whether they were meeting their fiduciary duties,” the lawmakers said in the letter. “According to an FDIC official, the mutually beneficial relationship between SVB and the VC and tech industry may have also undermined regulators’ efforts to sell SVB following its failure, as ‘banks had little time that weekend to get comfortable with SVB’s books, particularly when its borrowers and depositors were so closely entwined.’”
In the letter, they ask the companies for a response no later than April 24.
The announcement of this letter comes the same day that it was reported that the venture debt sector is wondering what comes next after the downfall of SVB.
The bank had helped pioneer the crucial-for-startups venture debt field, The Wall Street Journal (WSJ) reported Monday.
It’s still not clear how many other bank venture lenders will proceed amid a new emphasis on risk management following the SVB collapse, the report said.
Days earlier, on Thursday (April 6), Bloomberg News reported that funding to U.S. tech startups plummeted 55% during the first quarter.