Senate Banking Committee Chairman Sherrod Brown asked banks affiliated with Bill Hwang Archegos Capital Management to explain its role in the implosion of the firm.
Credit Suisse Securities LLC, Nomura Holding America Inc., Goldman Sachs Group Inc. i Morgan Stanley should respond to “margin call responses and market activity associated with Archegos ”, according to a a letter to firms released by the Ohio Democrat on Thursday.
Brown compared the forced sale of the Hwang family office to Long-Term Capital Management and other episodes that destabilized markets, and said they show a threat to investors “when excessive leverage is combined with reckless risk-taking,” the letter said.
Although Brown has not asked firms to testify, his effort may signal that lawmakers could hold hearings on the issue.
“I am disturbed, but not surprised by the news that Archegos has entered into risky derivative transactions that have been facilitated by large investment banks, resulting in a panicked sale of tens of billions of dollars worth of shares, and those banks collectively lost nearly $ 10 billion,” Brown wrote .
Brown said he wants details on the regulatory requirements for family offices, how they are rated as potential clients, and what collateral is maintained.
The senator also sought the approval of the supervisory body or risk committee for Archegos, as well as any “review of the 2012 criminal wire fraud agreement by Tiger Asia Management LLC, Mr. Hwang’s previous firm.