Goldman Sachs pulled off one part of a planned rescue of Silicon Valley Bank (SVB). Unfortunately, the sale of a portfolio of securities with a book value of almost $24 billion by SVB to the firm on March 8 for $21.45 billion did not accompany a successful equity fundraising and help to shore up confidence in the technology-focused lender.
SVB instead failed within a couple of days, as a bank run prompted its receivership and a US government bailout of its uninsured depositors.
Goldman was at least able to deploy its silver linings trading playbook by turning a quick dealing profit on the purchase of bonds from SVB, which was a cheering result in an otherwise distressing episode for global financial markets.
The amount of the trading profit is a matter of some debate. There were reports that it had cleared $100 million from buying then selling or offsetting the bonds, which were high-quality securities such as Treasuries, though a source familiar with the trade said that the total was much less than $100 million.
Goldman declined to comment.
The bank’s managers appear to have opted to cut the cost of managing its own interest-rate duration exposure
Much will have depended on the velocity of the offsetting of SVB’s troublesome portfolio.
