President Biden on Friday urged Congress to levy legal and monetary penalties for executives of failed banks in the wake of the two of three biggest U.S. bank collapses.
The president said lawmakers should pass legislation that would make it easier for regulators to assess civil penalties on executives, ban them from working again in the banking sector and claw back compensation.
He added the law should expand the powers of the Federal Deposit Insurance Corp. to hold leaders of collapsed institutions accountable.
“No one is above the law — and strengthening accountability is an important deterrent to prevent mismanagement in the future,” Mr. Biden said in a statement.
“Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institution failing,” the statement continued.
Following the closure of Silicon Valley Bank and Signature Bank this week by regulators aiming to prevent financial chaos, Senate Democrats have pushed for tougher penalties for bank executives whose actions contribute to a collapse.
The president’s call also comes one day after some of the nation’s largest financial institutions organized a $30 billion rescue of First Republic, a midsize bank struggling to stay solvent.
Sen. Elizabeth Warren, Massachusetts Democrat, has been leading the charge, arguing that Trump-era bank regulation rollbacks let executives at SVB and Signature make risky investments with weak oversight.
In a New York Times op-ed, Ms. Warren called out Greg Becker, ex-CEO of SVB, who earned $9.9 million in compensation last year, and Joseph DePaolo, former head of Signature Bank, who took home $8.6 million in compensation. She said those amounts should be clawed back along with bonuses for other executives at the two banks.
Ms. Warren said this week that 16 Democratic senators and 31 Democratic House lawmakers support draft legislation that would repeal the Trump administration’s easing of bank regulations as well as impose tougher penalties for bank executives.
House Republicans say the 2018 relaxing of standards isn’t the problem. Instead, they argued that regulators were asleep at the wheel and not flagging questionable investments. They also blame the bank executives for prioritizing left-wing causes over investments that would produce a financial return for investors.