Biden seeks tougher penalties for bank execs
WASHINGTON — 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 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 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.
Congress has already begun to address the aftermath of the bank failures.
On Friday, the House Financial Services Committee’s top Democrat, Rep. Maxine Waters of California, said in a letter to regulators that while she is crafting legislation to give regulators more authority, “it is critical that your agencies act now to investigate these bank failures and use the available enforcement tools you have to hold executives fully accountable for any wrongful activity.”
The Justice Department, Security and Exchange Commission, Federal Reserve, the California state regulator of Silicon Valley Bank and several congressional committees have announced some form of investigation into the bank failure.
Additionally, a group of Senate Democrats on Thursday introduced the Deliver Executive Profits on Seized Institutions to Taxpayers Act, which would claw back profits made by bank executives on the sale of stocks and compensation bonuses earned within 60 days of a bank failure, among other things.
And Sens. Jack Reed, D-R.I., and Chuck Grassley, R-iowa, reintroduced legislation this week to strengthen the SEC’S ability to crack down on violations of securities laws.