Sen. Cruz Opens Oversight Probe into Biden’s Big Tech Bank Bailout

March 16, 2023

Investigation seeks information about Silicon Valley Bank failure & SF Fed’s missed warning signs

WASHINGTON, D.C. – U.S. Senate Commerce Committee Ranking Member Ted Cruz (R-Texas) today sent letters to Silicon Valley Bank (“SVB”) and the Federal Reserve Bank of San Francisco (“SF Fed”) launching an oversight investigation into the bailout and failure of Silicon Valley Bank. The investigation will look at SVB’s obvious lax risk management practices and the failure of the SF Fed to properly monitor for interest rate exposure and run risk. In particular, the letters from Sen. Cruz seek information about whether the SVB and its regulator, the SF Fed, were too fixated on woke environmental, social, governance (“ESG”) practices at the expense of their fundamental risk management responsibilities.

Sen. Cruz is also asking whether the SF Fed gave special treatment to SVB, which was required to conduct frequent internal liquidity stress tests. It is unclear how frequently—if at all—SVB tested for illiquidity and exposure to rising interest rates.

In his letter to SVB CEO Tim Mayopoulos, Sen. Cruz writes:

“SVB’s conduct raises concerns that it may have been more obsessed with promoting woke ESG practices than following sound banking practices.  There is evidence to support such concerns.  For example, SVB did not have a chief risk officer from April 2022 to January 2023—an eight month period during which “the VC market was spiraling.” Yet six months after the George Floyd protests began, it hired a chief diversity, equity and inclusion officer to “champion, promote and guide the company’s diversity, equity and inclusion (DEI) strategies for its global workforce.” Moreover, in 2022, SVB changed the name of its Board’s “Governance Committee” to the “Governance and Corporate Responsibility Committee and expanded its oversight of the ESG strategy and program.”

On the SF Fed’s missed warning signs regarding SVB, Sen. Cruz writes:

“The SF Fed’s failure to address SVB’s obviously risky structure is frankly shocking. As you know, one of the central purposes of the Federal Reserve system is to promote the safety and soundness of financial institutions. It employs a team of over 400 economists, including dozens in the supervision and regulation division. The SF Fed, in particular, has a dedicated fintech team. And until March 10, 2023 SVB’s CEO served on the board of the SF Fed. The SF Fed had all of the resources and information necessary to properly supervise SVB, yet it spectacularly failed to do so.  

“Instead of fulfilling its statutory mandate to supervise SVB, the SF Fed has been distracted with engaging in politically-charged research and advocacy on environmental, social, and governance (“ESG”) and diversity, equity, and inclusion (“DEI”) topics, like global warming and racial justice.”

Pursuant to this investigation, Sen. Cruz is demanding that SVB and the SF Fed answer a number of questions regarding SVB’s radical ESG agenda and whether or not SVB performed internal liquidity stress tests or received exemptions from such tests.

Read full letters to Silicon Valley Bank HERE and the Federal Reserve Bank of San Francisco HERE.