Senate Banking Committee Chairman Sherrod Brown, D-Ohio, is demanding answers from Credit Suisse and other banks on their margin call and market activity connected to Archegos Capital Management, the hedge fund that defaulted on margin calls by Credit Suisse and other banks last month.
In the chairman's letter sent Wednesday to Credit Suisse Securities, Nomura Holding America, Goldman Sachs and Morgan Stanley, Mr. Brown said he is "troubled, but not surprised, by the news reports that Archegos entered into risky derivatives transactions facilitated by major investment banks, resulting in panicked selling of stocks worth tens of billions of dollars and those banks collectively losing nearly $10 billion."
Though details are still unclear, the massive transactions and losses raise questions about the banks' relationship with Archegos and treatment of family offices, Mr. Brown said. He cited Long-Term Capital Management and Amaranth Advisors as similar examples of market instability "when excessive leverage is combined with careless risk taking."
The firms have until April 22 to answer detailed questions from the committee about the Archegos transactions and Credit Suisse's involvement.
Two senior executives have left Credit Suisse, and the firm is looking into the supply chain finance funds run by Credit Suisse Asset Management, to address what happened with Archegos. Credit Suisse said it expects to take a 4.4 billion Swiss francs ($4.7 billion) hit from the failure of the hedge fund to meet margin commitments.