Senate Banking Committee Chair Brown targets banks ties to Archegos


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

Lucas Jackson | Reuters

Sen. Sherrod Brown, chairman of the highly effective Senate Banking Committee, is taking purpose at three banking giants’ ties to Archegos Capital after the fund’s latest losses blitzed the market.

In letters to leaders at Goldman Sachs, Nomura Holding America and Credit Suisse, the Ohio Democrat signifies he is searching for particulars on their relationship to Archegos. The letters, first reviewed by CNBC, are dated Wednesday. CNBC obtained a letter from Brown to Morgan Stanley after publication of this story.

Archegos, a household funding office run by former Tiger Management analyst Bill Hwang, triggered a sell-off in shares like Discovery and ViacomCBS final month when it was pressured to liquidate its positions in these corporations.

Several banks have been caught within the fallout. Credit Suisse and Nomura have been two prime brokers that took vital losses. Two executives at Credit Suisse introduced they might be stepping down.

Goldman and Morgan Stanley, then again, managed to promote a lot of the inventory associated to its Archegos’ margin calls and prevented any losses.

Brown despatched letters to Goldman CEO David Solomon, Crystal Lalime, normal counsel of Credit Suisse and Yo Akatsuka, CEO of Nomura Holding America. The letter to Morgan Stanley was addressed to their CEO James Gorman.

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The letters are the primary response from Congress that trace at a potential investigation and transcend preliminary statements merely condemning the market chaos, such as the one Brown issued last week. At the time, Brown referred to as on regulators to take a “closer look” at Archegos.

The committee has jurisdiction over the world’s largest banks and frequently engages with the heads of the Securities and Exchange Commission. The SEC has reportedly opened a preliminary investigation into Hwang and his recent trades.

Sen. Elizabeth Warren, D-Mass., who can also be a member of the Senate Banking Committee, recently told CNBC that “Archegos’ meltdown had all the makings of a dangerous situation.”

Brown’s letters to the three banking officers strive to delve into the hyperlinks between the monetary establishments and Archegos.

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

Brown goes on to ask the executives to “outline the know your customer (KYC) review and client onboarding process for family offices, including any consideration given to whether the family office is subject to regulatory registration or reporting.”

On Archegos, Brown asks for “the client onboarding process, including any supervisor or risk committee approvals, for Archegos, identifying when it became a client” together with requests for the banks to “identify the broker-dealer, bank, and other entities, directly or indirectly, involved in transactions with Archegos and that participated in the margin call and resulting stock sales.”

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

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