Sen. Elizabeth Warren, D-Mass., greets Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, during the Senate Banking, Housing, and Urban Affairs Committee hearing in Dirksen Building on Tuesday, March 28, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
WASHINGTON — Two top progressive lawmakers questioned whether Silicon Valley Bank offered its largest depositors unusually cushy treatment, one month after the institution collapsed and sparked broader damage to the banking system.
In letters to depositors dated Sunday, Sen. Elizabeth Warren, D-Mass., and Rep. Alexandria Ocasio-Cortez, D-N.Y., sought details on what they called the “cozy” relationship between SVB and 14 of its biggest depositors. Among those who received letters are Roblox CEO David Baszucki, BlockFi CEO Zac Prince and Roku CEO Anthony Wood.
“Silicon Valley Bank’s unusually cozy relationship with its clients increased the threat of contagion when the bank went under,” Warren said in a statement. “The American people deserve to know how these mutual backscratching arrangements developed, who benefitted from them, and what role they played in Silicon Valley Bank’s failure.”
SVB’s banking practices were particularly attractive to startup companies that deposited more than the $250,000 limit insured by the Federal Deposit Insurance Corporation. Over 95% of the bank’s deposits were uninsured as of December, which threatened companies’ ability to make payroll after the bank failed.
The bank’s 10 largest accounts held $13.3 billion in deposits, the lawmakers wrote.
Some of the “coddling” and “white glove” benefits that bank executives used to attract venture capitalist depositors included lower interest mortgage rates for startup founders who couldn’t get loans from other banks, generous lines of credit that allowed depositors to quickly wire money to their startups, and sponsored ski trips, conferences and fancy dinners, the lawmakers said.
“If the reports are accurate, these mutual backscratching arrangements could help explain why some customers placed massive, uninsured deposits at SVB,” the lawmakers wrote. “And 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 business practices of SVB executives might have also complicated the sale of the failed bank to another financial institution due to the close relationship between borrowers and depositors, the lawmakers wrote.
Warren and Ocasio-Cortez asked the depositors to provide details on any special treatment they received from SVB by April 24. They asked for information including a list of benefits and perks and any requirements to hold deposits with SVB in exchange for fringe benefits.
Spokespeople for Roblox, BlockFi and Roku did not immediately respond to requests for comment.