October 4, 2023

Senator Sherrod Brown (D-OH) speaks at the National Action Network 2019 National Congress in New York on April 5, 2019.

Lucas Jackson | Reuters

Senator Sherrod Brown, chairman of the Senate’s powerful banking committee, is seeking to tie three banking giants to Archegos Capital after the fund’s recent losses rocked the market.

In letters to executives at Goldman Sachs, Nomura Holding America, and Credit Suisse, the Ohio Democrat indicates that he is looking for details about her relationship with Archegos. The letters, which were first checked by CNBC, are dated Wednesday. CNBC received a letter from Brown to Morgan Stanley after this story was published.

Archegos, a family investment office owned by former Tiger Management analyst Bill Hwang, sparked a sell-off of stocks like Discovery and ViacomCBS last month when it was forced to liquidate its positions in those companies.

Several banks were affected by the fallout. Credit Suisse and Nomura were two top notch brokers who suffered significant losses. Two Credit Suisse executives announced their resignation.

Goldman and Morgan Stanley, on the other hand, managed to sell most of the shares in connection with their Archegos’ margin calls and avoid losses.

Brown sent letters to David Solomon, CEO of Goldman, Crystal Lalime, General Counsel of Credit Suisse, and Yo Akatsuka, CEO of Nomura Holding America. The letter to Morgan Stanley was addressed to its CEO, James Gorman.

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The letters are the first response from Congress to point to a possible investigation and go beyond initial statements condemning market chaos such as the one Brown issued last week. At the time, Brown urged regulators to “take a closer look” at Archegos.

The committee is responsible for the largest banks in the world and works regularly with the heads of the Securities and Exchange Commission. The SEC has reportedly opened a preliminary investigation into Hwang and its recent deals.

Senator Elizabeth Warren, D-Mass., Who is also a member of the Senate Banking Committee, recently told CNBC that “Archegos’ collapse was all set for a dangerous situation”.

Brown’s letters to the three bank employees attempt to investigate the links between the financial institutions and Archegos.

“The details and ultimate consequence of Archegos ‘failure remain to be seen, but the massive transactions and losses raise several questions about Goldman Sachs’ relationship with Archegos and the treatment of so-called ‘family offices’, Mr Hwang’s story and the transactions, mentioned in news reports, “the letter to Solomon said.

Brown urges executives to “outline your client review (KYC) and client onboarding process for family offices, including any considerations on whether the family office is subject to government registration or reporting.”

At Archegos, Brown is asking Archegos to “complete the customer onboarding process, including any approval from supervisors or risk committees to determine when he became a customer,” as well as requesting the banks, “the broker-dealer, the bank, and other companies to identify”. directly or indirectly involved in transactions with Archegos and involved in the margin call and the resulting share sales. “

Brown calls on Goldman, Credit Suisse, Morgan Stanley and Nomura to reply to his letters by April 22nd.