President Biden is asking Congress to give regulators the authority to recover executive pay after a series of bank failures.
“When banks fail due to mismanagement and excessive risk-taking, it should be easier for regulators to recover executive compensation, impose civil penalties, and ban executives from working in banking again,” Biden said in a statement.
“Congress must act to impose tougher penalties on senior bank executives whose mismanagement contributed to the failure of their institutions.”
Biden’s comments come after the president said on Monday that “no one is above the law” and that those responsible for failures must be held accountable.
Senate Banking Committee Chairman Sherrod Brown (D-OH) is also calling for stronger rules to control risky behavior by banks and said he and the committee will look for ways to hold executives accountable.
“We need stronger rules to control risky behavior and detect incompetence,” Brown said. “Our job on our committee is one of oversight, and we will be looking at every way to protect working families’ money from risky bets that didn’t pan out in Silicon Valley or Wall Street.”
Waters asks regulators to complete ‘long overdue’ process
House Financial Services Committee ranking member Maxine Waters (D-CA) also sent a letter on Friday to Fed Chairman Jay Powell, FDIC Chairman Martin Gruenberg and SEC Chairman Gensler, urging them to use the full extent of their authority to hold Silicon Valley Bank and Signature Bank Executives accountable.
Waters also urged regulators to explore their ability to recover compensation.
“I ask that any punitive action consider the profits or gains that these executives may have made from the sale of their shares in the days and weeks leading up to the bank’s failures, whether the sale was due to 10b5-1 plans, direct sales or through discretionary brokerage accounts, through derivatives or hedging activities,” the letter reads.
Waters also said he is working to develop and enact legislation to advance President Biden’s direction to Congress.
“Its agencies should finish the long-awaited regulation this year and ensure it also includes a robust recovery requirement and consider taking further measures so that executives are not rewarded with large bonuses if the bank is mismanaged or fails.” , says the letter.
Along with Waters, Senator Elizabeth Warren (D-MA) also called for executive pay recovery earlier this week. Both blamed the rollback of Trump-era capital requirements for small and medium-sized banks for bank failures. Warren, along with Representative Katie Porter (D-CA), introduced legislation to repeal these changes.
The actions come as reports emerge that the CEO of Silicon Valley Bank cashed in his shares and stock options just weeks before the bank’s bankruptcy.
Authorities are trying to stop the Silicon Valley bank and Signature Bank failure problems from spreading through the banking system and infecting other banks.
Last Sunday night, the Treasury Department, along with the FDIC and the Federal Reserve, announced that they would support all deposits at Silicon Valley Bank, as well as seize Signature Bank, as cracks in the financial system rattle markets.
Treasury Secretary Yellen said during testimony before the Senate Finance Committee on Thursday that policymakers need to examine the necessary liquidity requirements for a bank with such a heavy reliance on uninsured and enforceable deposits.
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