Biden calls on Congress to impose tougher sanctions on failed bank executives
Biden said current law limits his administration’s power to hold bank executives accountable when their institutions fail and are placed in receivership under the Federal Deposit Insurance Corp., or FDIC, as Silicon Valley Bank has done. A week ago.
Biden has called on Congress to expand the FDIC’s authority to impose harsher penalties on the executives of these banks, including barring them from accepting other banking jobs, imposing fines and demanding their remuneration.
That compensation is expected to include gains from stock sales, the White House said later Friday, noting that Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of company stock a few months ago. days before the bank collapsed. Currently, the FDIC only has the authority to collect this compensation from the largest financial institutions under the Dodd-Frank Act, the law that tightened the rules in the wake of the 2008 financial crisis. .
“This authority should be extended to cover a broader set of large banks – including banks the size of Silicon Valley Bank and Signature Bank,” the White House said in its statement, referring to the bank based in New York that needed federal intervention.
The White House also noted that under current law, the FDIC can only issue fines to bank executives who engage “recklessly” in a pattern of “dangerous or unsound” practices. The federal agency can also bar executives from taking jobs at other banks only if they show a “willful or continuing disregard for the safety and soundness” of their bank.
“Congress should strengthen this tool by lowering the legal standard for imposing this ban when a bank is placed in FDIC receivership,” the White House said. “The president thinks that if you’re responsible for one bank failing, you shouldn’t be able to just turn around and run another one.”
Biden’s populist request to Congress reflects his initial concerns about aiding Silicon Valley Bank, stemming in part from his belief that the federal government had been too friendly with big banks during the 2008 crisis. The president later agreed federal intervention to protect depositors. His call on Friday targeted bank executives.
Biden also again defended his administration’s decision to protect Silicon Valley Bank depositors, saying it was necessary to protect jobs and small businesses.
“This week we took decisive action to stabilize the banking system without putting taxpayers’ money at risk,” he said. “Our banking system is now more resilient and more stable thanks to the measures we have taken. Monday morning, I told the American people and American businesses that they should know that their deposits will be there if and when they need them. This continues to be the case.
The outlook for legislation to tighten banking regulations is uncertain, as Republicans control the House and strongly supported loosening the rules in 2018. Dozens of moderate Democrats also backed the bill.
President Donald Trump signed the 2018 bill, sponsored by Sen. Mike Crapo (R-Idaho), which reduced requirements imposed by the 2010 Dodd-Frank Act and reclassified the size of banks that would face increased regulatory scrutiny, raising that threshold for some from $50 billion in assets to $250 billion in assets. Silicon Valley Bank had about $209 billion in assets, so it was exempt from these stricter regulations.
Lawmakers from both parties who backed the 2018 bill dismissed concerns that these relaxed regulations had led to the failure of Silicon Valley Bank. But Democrats who opposed the 2018 legislation said the two were linked.
“Banks have taken on risks. They paid the leaders a lot more money, as well as salaries and bonuses. And everything went very well. Profits rose until they blew up the banks,” Sen. Elizabeth Warren (D-Mass.) told The Washington Post this week.
Camila DeChalus and Leigh Ann Caldwell contributed to this report.