President Biden Calls for Tougher Penalties for Bank Executives
President Joe Biden is urging Congress to pass legislation that would give the Federal Deposit Insurance Corporation more enforcement authority to punish senior bank executives whose mismanagement contributes to their institutions' failure. In the wake of the recent collapses of Silicon Valley Bank and Signature Bank, Biden believes that tougher penalties should be imposed on banking executives if their mismanagement causes their institutions to fail.
The President wants Congress to expand the FDIC’s authority to include the ability to claw back pay, impose fines, and bar executives from taking other jobs in the banking industry. He claims that the law currently limits the administration’s authority to hold executives responsible and that Congress must act to impose tougher penalties for those executives.
“No one is above the law – and strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement. “When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again.”
The President also noted that the current standard for the FDIC to bar executives from working at other banks is too high and suggests that Congress should lower the threshold. Furthermore, Biden has requested that Congress make it easier to put anyone leading a firm placed into FDIC receivership to earn such a penalty.
These proposed regulations would come in addition to the $30 billion rescue package recently secured by First Republic Bank from 11 of the largest U.S. banks. Meanwhile, moderate Senate Democrats who voted to loosen regulations on midsize banks in 2018 are standing by their votes in the wake of Silicon Valley Bank’s collapse, joining Republicans in resisting enhanced scrutiny for financial institutions.
Biden is also seeking to hold bank executives personally responsible for the failure of their institutions, noting that “if you’re responsible for the failure of one bank, you shouldn’t be able to just turn around and lead another.” He added, “The law limits the administration’s authority to hold executives responsible. When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again.
0. “Biden seeks FDIC authority to claw back bankers' compensation” Roll Call , 17 Mar. 2023, https://www.rollcall.com/2023/03/17/biden-seeks-fdic-authority-to-claw-back-bankers-compensation
1. “Biden Wants to Expand a Federal Agency's Power to Go After Failed Bank Execs” GovExec.com, 17 Mar. 2023, https://www.govexec.com/oversight/2023/03/biden-wants-expand-federal-agencys-power-go-after-failed-bank-execs/384135/
2. “Biden wants Congress to boost penalties for executives when mid-sized banks fail” NPR, 17 Mar. 2023, https://www.npr.org/2023/03/17/1164270771/biden-penalties-bank-executives-signature-silicon-valley-congress
3. “Senate Democrats Who Voted For 2018 Bank Deregulations Say They Have No Regrets” Forbes, 15 Mar. 2023, https://www.forbes.com/sites/saradorn/2023/03/15/senate-democrats-who-voted-for-2018-bank-deregulations-say-they-have-no-regrets
4. “Biden asks Congress to impose tougher penalties on executives of failed banks” The Washington Post, 17 Mar. 2023, https://www.washingtonpost.com/politics/2023/03/17/biden-silicon-valley-bank-federal-intervention/