Advertisement

Biden calls on Congress to impose tougher penalties for bank failures

WASHINGTON – President Joe Biden on Friday asked Congress to expand the government's ability to hold executives accountable for bank collapses, saying he doesn't have the authority he needs to respond to the recent failures at Silicon Valley Bank and Signature Bank.

"The law limits the administration’s authority to hold executives responsible," Biden said in a statement. "Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing."

Biden said it should be easier to:

  • Claw back compensation from executives, including gains from stock sales;

  • Impose civil penalties;

  • Ban executives from working in the banking industry again when their banks enter receivership.

President Joe Biden speaks about the U.S. banking system on March 13, 2023 in the Roosevelt Room of the White House.
President Joe Biden speaks about the U.S. banking system on March 13, 2023 in the Roosevelt Room of the White House.

Stay in the conversation on politics: Sign up for the OnPolitics newsletter

What is Biden reacting to?

The Federal Deposit Insurance Corporation, or FDIC, took control last week of SVB's assets after the bank ran out of cash. Federal regulators also assessed that Signature Bank of New York presents a systemic risk and took it over. Biden said Monday that managers of the banks would be fired, and investors would not be protected.

Is it a bank bailout?: On SVB, White House fights comparisons to 2008 as Biden confronts bank crisis

What authority does the federal government have now?

Several federal entities – the FDIC, the Securities and Exchange Commission and the Department of Justice – have the authority to investigate what led to the bank failures.

The Justice Department and the SEC launched preliminary investigations this week after the FDIC took control of SVB and Signature Bank.

SVB fallout: Yellen tells Congress that banking system 'remains sound,' savings 'remain safe'

What additional authority is Biden asking for?

The FDIC has limited ability to claw back any compensation or gains from stock sales that senior executives may have received shortly before their banks entered receivership, according to the White House. Biden wants that clawback authority to cover more than the largest financial institutions so it would also apply to banks the size of SVB and Signature Bank.

Biden also wants to lower the legal standard for barring executives from continuing to work in the banking industry after their banks enter receivership. Under existing law, the standard is “willful or continuing disregard for the safety and soundness” of a bank.

And Biden wants Congress to expand the FDIC’s authority to impose monetary penalties on negligent executives. Currently, executives can be fined for “recklessly” engaging in a pattern of “unsafe or unsound” practices, regardless of whether their bank enters receivership.

More: Silicon Valley Bank collapse explained in graphics

This article originally appeared on USA TODAY: Biden calls on Congress to impose tougher penalties for bank failures