‘Penalize execs of failed banks’
WASHINGTON, March 19, (AP): President Joe Biden on Friday called on Congress to allow regulators to impose tougher penalties on the executives of failed banks, including clawing back compensation and making it easier to bar them from working in the industry.
Biden wants the Federal Deposit Insurance Corporation to be able to force the return of compensation paid to executives at a broader range of banks should they fail, and to lower the
them from happening again. She defended the government’s argument that taxpayers will not end up paying the cost of protecting uninsured money at Silicon Valley and Signature.
The Treasury secretary was the first administration official to face lawmakers over the decision to protect uninsured money at the two failed regional threshold for the regulator to impose fines 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 to prevent mismanagement in the future,” Biden said in a statement. “Congress must act to impose tougher penalties for senior
banks, a move some have criticized as a bank “bailout.”
“The government took decisive and forceful actions to strengthen public confidence” in the U.S. banking system, Yellen testified. “I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that bank executives whose mismanagement contributed to their institutions failing.”
Currently the FDIC can only take back the compensation of executives at the largest banks in the nation, and other penalties on executives require “recklessness” or acting with “willful or continuing disregard” for their bank’s health. Biden wants Congress to allow the regulator to impose penalties for “negligent” executives - a lower legal threshold.
their deposits will be there when they need them.”
The week has been a whirlwind for markets globally on worries about banks that may be bending under the weight of the fastest hikes to interest rates in decades, increasures intended to quell rising inflation on consumer goods.