The collapse of several major U.S. banks has been among the biggest subject on investors minds since last week. The story also attracted attention from the community outside of stocks and finance due to the impact it could have on the economy and companies involved.
A new report links a state governor to potentially breaking a law related to one bank’s demise.
What Happened: Silicon Valley Bank, a unit of SVB Financial Group (NASDAQ:SIVB), was closed last week by regulators and the FDIC was placed in charge of the bank.
The government stepped in over the weekend with a backstop to guarantee depositors’ capital, while also potentially wiping away the investments from stockholders and bondholders.
Many individuals and investors lobbied for the government to step in and support the depositors of the banks, which included many wealthy individuals and large companies in the technology and biotech sector.
Among the people who asked the U.S. government to step in was California Gov. Gavin Newsom. The governor said on Saturday he had “been in touch with the highest levels of leadership at the White House and Treasury.”
“Everyone is working with FDIC to stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy,” Newsom said in a statement.
Related Link: The Big Picture: Why Silicon Valley Bank Collapsed, A Simple Explainer
Why It’s Important: A new report from The Intercept highlighted that the California governor has personal ties to Silicon Valley Bank which were not disclosed.
The report shows Newsom having personal accounts at the bank and links to three private wineries and his wife’s charity, according to Business Insider, citing The Intercept.
Non-profit California Partners Project counts Newsom’s wife Jennifer Siebel Newsom as a co-founder. The charity has an account with the bank and previously received a $100,000 donation from SVB. Another report links the non-profit more closely to the banking company with John China, an SVB executive sitting on the board of directors for California Partners Project.
A law in California bans public officials from potentially influencing decisions when they have a “financial interest,” which could now put Newsom in the spotlight and violation of the law.
Business Insider said it was not known if Newsom disclosed relationships to the bank with the White House.
A spokesperson for Newsom told Insider that the governor’s “business and financial holdings are held and managed by a blind trust.”
In a response to the government’s help, Newsom offered praise for the current government administration under President Joe Biden and the support for small businesses and non-profits.
“Their actions this weekend have calmed nerves, and had profoundly positive impacts on California — on our small businesses that can now make payroll, workers who will get their paychecks, on affordable housing projects that can continue construction, and on nonprofits that can keep their doors open tomorrow.”
Newsom called California “a pillar of the American economy” and praised Biden and officials for doing the right thing.
While he has not announced an official campaign, Newsom is among the potential Democratic candidates to enter the 2024 presidential election race.
Betting odds at DraftKings have Newsom at odds of +2000 to win the presidency, trailing many of the top candidates such as Joe Biden, Donald Trump and Ron DeSantis. Among potential Democratic candidates, Newsom trails only President Biden and Vice President Kamala Harris in the odds.
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