Biden asks Congress to get tough on bank execs
US President Joe Biden has urged Congress to make it easier for regulators to hold executives at failed banks accountable. The move comes in the wake of the collapse of Silicon Valley Bank, a California-based lender, last week.
Biden said he was "firmly committed to accountability for those responsible for this mess" and called for measures such as recouping gains from share sales and banning disgraced bosses from working in the industry.
In a statement released on Friday, the President emphasized the need to strengthen accountability and ensure that no one is above the law. He stated that this is an important deterrent to prevent mismanagement in the future.
Biden's call for action comes amid concerns over the lack of accountability for executives in the banking sector, particularly in cases where their actions have led to the collapse of financial institutions. Previously there has been criticism over the lack of action taken by US authorities against bankers who have been involved in financial failures.
“No one is above the law – and strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement. “When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again.”
The White House has called on Congress to give the Federal Deposit Insurance Corporation (FDIC), expanded powers to recover compensation from executives at failed regional banks like Silicon Valley Bank (SVB) and Signature Bank, a New York-based lender that recently collapsed. Currently, the FDIC is only authorized to recover earnings from executives at larger banks. SVB's former CEO, Greg Becker, sold $3.6 million worth of the bank's stock just two weeks before its collapse.
The White House also seeks to increase the FDIC's power to ban bosses of failed banks from holding jobs at other lenders. At present, the FDIC can only prevent disgraced executives from holding similar positions if they engage in "wilful or continuing disregard for the safety and soundness" of their bank. The White House has proposed that Congress "lower the legal standard" to apply to all banks that fall into receivership.
In a memo, the White House stated that "the president believes that if you’re responsible for the failure of one bank, you shouldn’t be able to just turn around and lead another." These measures come amidst concerns over the lack of accountability for executives in the banking sector, particularly in cases where their actions have resulted in the collapse of financial institutions. It remains to be seen whether Congress will adopt the proposals put forward by the White House.
Even as reverberations from the Silicon Valley Bank collapse can still be felt, a bill has been introduced in the Senate that aims to claw back two forms of compensation from top executives at failed banks: bonuses and profits from stock sales.
Democratic Senator Richard Blumenthal from Connecticut introduced the bill, S. 800, on Tuesday, proposing to amend IRS rules to impose a higher tax rate on bonuses and stock options' profits for executives at banks taken over by the Federal Deposit Insurance Corporation (FDIC).
The bill gained a notable co-sponsor, Senator Kyrsten Sinema, an Independent from Arizona, by Friday morning. As a swing vote within the Democratic caucus, Sinema's support is deemed essential in getting any bill passed in the Senate, especially if Republicans oppose it.