House Republicans Say SVB Rescue Shouldn’t Benefit China

A Silicon Valley Bank office in Tempe, Ariz., on March 14, 2023. Rebecca Noble/AFP via Getty Images

The U.S. government’s rescue of Silicon Valley Bank (SVB) shouldn’t benefit the Chinese Communist Party (CCP), House Republicans said in a letter to President Joe Biden.

Republican lawmakers requested an investigation into the CCP’s position in SVB, the California-based financial institution that collapsed earlier this month, to determine if the federal government’s restructuring of the lender could help CCP-supported firms with taxpayer money.

The letter, first obtained by Fox News (pdf), had 19 co-signers and cited reports that SVB’s subsidiary, SPD Silicon Valley Bank, was a 50-50 joint venture between the state-owned Shanghai Pudong Development Bank and SVB Financial. The group of GOP lawmakers is trying to find out what Chinese businesses were connected with SVB and how much of their cash and asset holdings were deposited in the bank.

“The fact that both SSVB and SVB have played an indispensable role in financing China’s innovation economy, serving over 2,000 clients and advising CCP government regulators is extremely concerning and raises serious questions,” the letter, drafted by Rep. Rich McCormick (R-Ga.), states. “SVB is reported to assist Chinese businesses in obtaining American investment or going public abroad, thereby circumventing restrictions on raising funds and listing outside of China.”

The letter concludes by stating that the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), and the Treasury Department “cannot afford to be asleep at the wheel,” while the CCP backs its companies with the help of U.S. venture capitalists “at the expense of American taxpayers.”

The Republican co-signers gave the White House an April 3 deadline to provide answers, related documents, and additional information.

Last week, sources told Bloomberg that the Biden administration was reviewing whether SVB’s failure applied more pressure on Chinese tech startups than the government in Beijing.

Will China Benefit From SVB Bailout?

In the aftermath of the SVB and Signature Bank failures, many Republicans have expressed concern that spending billions to bail out foreign uninsured or uncovered deposits would include those with ties to the Chinese regime.

“I ask the department to ensure that foreign adversarial regimes, as well as companies subject to their jurisdiction, are unable to exploit this moment for their own material benefit,” Sen. Marco Rubio (R-Fla.) wrote in a letter to Treasury Secretary Janet Yellen.

Treasury Secretary Janet Yellen testifies about the Biden Administration's fiscal year 2024 federal budget proposal before the Senate Finance Committee in Washington on March 16, 2023. Chip Somodevilla/Getty Images

Appearing before the Senate Finance Committee on March 16, Yellen was asked by Sen. James Lankford (R-Okla.) whether Chinese and foreign depositors from SVB would be made whole following the U.S. government’s intervention.

“I suppose that could include foreign depositors,” she said. “I don’t believe there’s any legal basis to discriminate among uninsured.”

In the days following SVB’s troubles, it was revealed that SVB contained many Chinese accounts. SPD Silicon Valley Bank issued a statement verifying its operations were “sound.”

“The bank has a standardized corporate governance structure and an independent balance sheet,” the company stated.

SVB first dealt with China in 1999 by starting an office in Beijing, providing venture capital investors and technology businesses client support and advisory services.

Meanwhile, First Citizens purchased about $72 billion of SVB’s assets at a sharp discount of $16.5 billion. The U.S. government will still be on the hook for the beleaguered bank’s $90 billion securities and other assets that will stay “in receivership for disposition by the FDIC.”

The FDIC confirmed that the estimated cost of SVB’s collapse to its Deposit Insurance Fund would be roughly $20 billion. The final tally will be determined after the receivership is finished.