Biden Calls on Congress to Punish Failing Bank Executives

President Joe Biden on Friday he called on Congress to make it easier for regulators to punish executives of failing banks, including by taking away their bonuses.

Biden said federal law prevented his administration from holding banks accountable.

“When banks fail due to mismanagement and excessive risk-taking, it should be easier for regulators to recover executive compensation, impose civil penalties, and bar executives from ever working in the banking industry again,” Biden said. it’s a statement.

Biden’s proposal follows the federal takeover of Silicon Valley Bank in California after it failed to meet depositors’ withdrawal requests last week. Federal agencies also closed Signature Bank in New York and took the dramatic step of guaranteeing all deposits at the two banks, despite many of their values ​​well exceeding the $250,000 covered by federal deposit insurance.

The measures were designed to prevent depositors at other regional banks from withdrawing their money in a panic, and the administration’s swift action drew praise from republicans and democrats Same in the Capitol.

Lawmakers have sharply criticized Silicon Valley Bank for taking on too much risk, as well as bank regulators for failing to stop it, despite Congress passing a bipartisan law in 2018 saying it was specifically warned would increase the risk of failure of a medium-sized bank.

But some members of Congress have questioned why the government should bail out Silicon Valley Bank’s tech-industry clients, even if the costs are covered by other banks’ fees.

Biden’s announcement on Friday puts the ball back in lawmakers’ court and echoes political anger over bonus pay given to executives at companies that were bailed out by the government after the crisis. 2008 financial

“Congress must act to impose tougher penalties on top bank executives whose mismanagement contributed to the bankruptcy of their institutions,” Biden said.

Pointing to reports that Silicon Valley Bank executives sold $3 million worth of company stock in the days before the bank failed, the White House said Congress should give Federal Deposit Insurance Corp. greater power to recover executive pay.

The Dodd-Frank Financial Reform Act of 2010 gave the FDIC the ability to recover compensation from executives of large financial institutions that fail and end up in a new “orderly resolution” process. The White House said in a fact sheet that that power would not apply in the case of Silicon Valley Bank.

Biden also called for the FDIC to be able to fine bank executives and bar them from having jobs at other banks.

Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, backed the idea of ​​more banker penalties in a statement Friday.

“Workers and small businesses have been forced to pay the price for executive arrogance and recklessness too many times before,” Brown said. “We need stricter rules to control risky behavior and detect incompetence.”

However, Biden’s endorsement of the bond recovery legislation also highlights the lack of progress in preventing similar failures in the wake of the Silicon Valley Bank collapse. He democrats and republicans Those who backed deregulation in 2018 kept their votes, and there is only medium support in Congress for reinstating the rules.

Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) have introduced legislation, cosponsored by dozens of Democrats in both houses, to reverse the 2018 deregulation bill. But both the leader of the majority of the Senate, Chuck Schumer (DN.Y.), like the White House have so far refused to explicitly endorse it.

“We appreciate those people who put their ideas together and put them on the table,” White House press secretary Karine Jean-Pierre said in a briefing with reporters on Thursday. “So we’re going to look closely at that bill.”

Igor Bobic contributed reporting.