The US president is calling on Congress to impose tougher penalties on senior officials of banks that fail due to mismanagement.
Washington, D.C. – US President Joe Biden has called on Congress to tighten regulations to allow “accountability” for executives of bankrupt banks bailed out by the government.
In a statement on Friday, Biden said leaders of banks that collapse “due to mismanagement and excessive risk-taking” should be fined and banned from working in the sector.
He made the remarks after two US financial institutions – Silicon Valley Bank (SVB) and Signature Bank – failed, sparking fears of a broader economic aftermath similar to the 2008 financial crisis.
The Biden administration responded quickly to the crisis by seizing the two banks and guaranteeing the money of all depositors at both banks, even those who were uninsured.
On Friday, Biden reiterated his assurance that the US banking system is “resilient and stable,” adding that he is “committed to holding accountability to those responsible for this mess.”
“If banks go bankrupt 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 the banking industry again,” Biden said in a statement. declaration.
“Congress must act to impose tougher penalties on senior bank executives whose mismanagement has contributed to the failure of their institutions,” he said.
When Silicon Valley and Signature Banks collapsed, we took steps to stabilize the banking system at no cost to taxpayers, protecting jobs and small businesses.
Now Congress must do more to hold senior bank executives accountable. pic.twitter.com/BupUZbQ5ul
— President Biden (@POTUS) March 17, 2023
The White House called on lawmakers to lower the bar needed to bar banking industry executives.
“The president believes that if you’re responsible for the failure of one bank, you shouldn’t be able to just turn around and run another,” according to a White House fact sheet.
Congress has the power to enforce regulations on the banking industry. Two years after the 2008 meltdown, US lawmakers passed a sweeping Wall Street reform bill. But some of his prescriptions were reversed in 2018 with twofold support.
SVB was the 16th largest bank in the US when it collapsed late last week. Specializing in loans to technology start-ups and the venture capitalists who fund them, it had invested much of its money in US Treasury bonds, the value of which fell as interest rates rose.
Senator Elizabeth Warren, a progressive Democrat who has spoken out against deregulations in the banking sector, supported Biden’s call for accountability.
“President Biden is rightfully fighting to hold bank executives accountable for their failures,” Warren wrote on Twitter.
“We must reclaim every penny of their unjust pay and bonuses, impose real penalties and ensure that these executives never work in the banking industry again,” she said. “Congress needs to step up a notch.”
Some Republicans have suggested that the SVB’s failure was due to what they portray as the bank’s emphasis on liberal cultural issues, including diversity.
“No bailouts for SVB (Silicon Valley Bank),” Republican Congressman Andy Biggs wrote on Twitter.
“The resources should not have been spent on wake/DEI (diversity, equality and inclusion) initiatives rather than on actual financial management,” he wrote. “It also doesn’t help that Biden’s outrageous spending is creating an interest rate chaos.”