WASHINGTON, March 17 (AP) President Joe Biden called on Congress on Friday to allow regulators to impose tougher penalties on executives at failed banks, including clawing back compensation and making it easier to bar them from working in the industry.
Biden wants the FDIC to mandate the return of compensation payments to executives of broader bank failures and lower the bar for regulators to fine them and bar executives from working at another bank.
He called on Congress to grant the FDIC those powers after the failures of Silicon Valley Bank and Signature Bank sent shockwaves through the global banking industry.
“Strengthening accountability is an important deterrent against future mismanagement,” Biden said in a statement. “Congress must act to impose tougher penalties on senior bank executives whose mismanagement caused their institutions to fail.”
Currently, the FDIC can only recoup the compensation of executives at the nation’s largest banks, while other penalties against executives require “recklessness” or “willful or persistent disregard” for the bank’s health. Biden wants Congress to allow regulators to penalize “negligent” executives — a lower legal bar.
Congress has already begun to deal with the aftermath of bank failures.
In a letter to regulators on Friday, Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, said that while she was drafting legislation to give regulators more power, it was “critically important.” It is important that your agencies act now to investigate these bank failures and use available enforcement tools to hold executives fully accountable for any improper activity.”
The Justice Department, the Securities and Exchange Commission, the Federal Reserve, California’s Silicon Valley bank regulator and several congressional committees have announced some form of investigation into the bank failure.
In addition, a group of Senate Democrats on Thursday introduced the “Profits of Executives of Seized Institutions to Taxpayers Act”, which would recoup bank executives’ profits from stock sales and compensation bonuses received within 60 days of bank failures, among other things. .
Senators Jack Reed (DR.I.) and Chuck Grassley (R-Iowa) reintroduced legislation this week to strengthen the SEC’s ability to fight violations of securities laws.
The White House highlighted reports that Silicon Valley Bank CEO Gregory Becker sold $3 million worth of bank stock in the days leading up to the collapse, saying Biden wants the FDIC to have recourse for the damages.
Silicon Valley Bank’s collapse on March 10, followed by New York’s Signature Bank two days later, brought back bad memories of the financial crisis that plunged the US into the Great Recession some 15 years ago.
Determined to restore public confidence in the banking system, the federal government took action over the weekend to protect all bank deposits, even those that exceed the FDIC’s limit of $250,000 per individual account.
Sen. Sherrod Brown, D-Ohio, chairman of the banking committee, welcomed Biden’s call for action in Congress, saying in an email that his committee “will look at all the money that can protect working families from risky bets.” approach, and those risky bets haven’t paid off in Silicon Valley or Wall Street.
“This includes holding accountable the executives who got this bank into trouble, and the regulators tasked with overseeing them, and working to reform our laws to better protect workers, small businesses, and taxpayers from corporate greed. “
John Cole, an accounting professor who specializes in executive compensation and corporate governance, questioned whether increasing the powers of regulators was the right move because “in the case of Silicon Valley, it’s not clear who is to blame for the bank failures”.
“A lot of people think it’s a failure of regulation, or a rapid rise in interest rates because of inflation,” he said.
Dennis Kelleher, president of Better Markets, a nonprofit that advocates for stricter financial regulation, said the White House was right to encourage Congress to act.
“Regulators must have a full arsenal to severely punish disloyal, irresponsible and reckless bank executives, officers and directors,” Kelleher said. (AP)
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)