The Washington Post

Biden calls for strengthen­ing penalties on bank executives who mismanage

Existing law constrains the ability to ensure accountabi­lity, he says

- BY AMY B WANG camila dechalus and leigh ann caldwell contribute­d to this report.

President Biden on Friday called on Congress to impose tougher penalties on senior bank executives whose mismanagem­ent contribute­s to the failure of their institutio­ns, alluding to the “mess” left behind by the collapse of Silicon Valley Bank and Signature Bank in recent days.

“I’m firmly committed to accountabi­lity for those responsibl­e for this mess,” he said in a statement. “No one is above the law — and strengthen­ing accountabi­lity is an important deterrent to prevent mismanagem­ent in the future.”

Biden said the current law limits his administra­tion’s authority to hold bank executives responsibl­e when their institutio­ns fail and enter receiversh­ip under the Federal Deposit Insurance Corp., or FDIC, as Silicon Valley Bank did a week ago.

Biden asked Congress to expand the FDIC’S authority to impose stronger punishment­s on executives at such banks, including barring them from taking other jobs in the banking industry, issuing fines and reclaiming their compensati­on.

That compensati­on should include gains from stock sales, the White House specified later Friday, noting that Silicon Valley Bank CEO Greg Becker sold $3.6 million in company stock days before the bank’s collapse. At this time, the FDIC has authority to claw back such compensati­on only from the very largest financial institutio­ns under the DoddFrank Act, the law that tightened rules in the aftermath of the 2008 financial crisis.

“That 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 New York-based bank that needed federal interventi­on.

The White House also noted that, under existing law, the FDIC can only fine bank executives who “recklessly” engage in a pattern of “unsafe or unsound” practices. The federal agency also can prevent executives from holding jobs at other banks only if they demonstrat­e “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 prohibitio­n when a bank is put into FDIC receiversh­ip,” the White House said. “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.”

Biden’s populist-driven request to Congress reflects his initial concerns about aiding the Silicon Valley Bank, stemming in part from his belief that the federal government had been too friendly to big banks during the 2008 crisis. The president later agreed to the federal interventi­on to protect depositors. His call on Friday targeted bank executives.

Biden also again defended his administra­tion’s decision to protect depositors at Silicon Valley Bank, saying it was necessary to shield jobs and small businesses.

“This week, we took decisive action to stabilize the banking system without putting taxpayer dollars at risk,” he said. “Our banking system is more resilient and stable today because of the actions we took. On Monday morning, I told the American people and American businesses that they should feel confident that their deposits will be there if and when they need them. That continues to be the case.”

The prospects for any legislatio­n to tighten banking regulation­s are uncertain as Republican­s control the House and strongly supported loosening the rules in 2018. Dozens of moderate Democrats also supported that bill.

President Donald Trump signed the 2018 bill, sponsored by Sen. Mike Crapo (R-idaho), that scaled down requiremen­ts imposed under the 2010 DoddFrank law and reclassifi­ed the size of banks that would have to face increased regulatory scrutiny, raising that threshold for some from $50 billion in assets to $250 billion in assets. Silicon Valley Bank had roughly $209 billion in assets, so it was exempt from those more-stringent regulation­s.

Lawmakers from both parties who supported the 2018 bill have dismissed concerns that those loosened regulation­s led to the failures of Silicon Valley Bank. But Democrats who opposed the 2018 legislatio­n have said the two are linked.

“The banks loaded up on risks. They paid the executives lots more money and salaries and bonuses. And everything went great. Profits went up right up until they blew the banks apart,” Sen. Elizabeth Warren (D-mass.) told The Washington Post this week.

 ?? Evelyn Hockstein/reuters ?? President Biden addresses the collapse of Silicon Valley Bank and Signature Bank in a speech at the White House on Monday.
Evelyn Hockstein/reuters President Biden addresses the collapse of Silicon Valley Bank and Signature Bank in a speech at the White House on Monday.

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