President of the United States Joe Biden has urged Lawmakers to strengthen rules to allow for “accountability” for CEOs of failed banks that the government has rescued.
Biden said in a statement on Friday that bank executives who fail “because to mismanagement and excessive risk taking” should pay fines and lose their jobs.
He made the remarks in response to the collapse of two American financial institutions, Silicon Valley Bank (SVB) and Signature Bank, which sparked worries about a wider economic fallout akin to the financial crisis of 2008.
As a swift response to the crisis, the Biden administration seized the two banks and guaranteed the funds of all depositors at both institutions, including those who lacked insurance.
On Friday, Biden restated his assurances that the US banking system is “resilient and stable”, adding that he is “committed to accountability for those guilty for this mistake”.
“It should be simpler for regulators to recoup compensation from executives, to apply civil penalties, and to bar executives from working in the banking industry again when banks collapse due to poor management and excessive risk taking,” Biden said in a statement.
Congress needs to take action to impose harsher punishments on senior bank executives whose poor management led to the failure of their firms, he said.
The White House urged lawmakers to lessen the standards needed to prohibit executives from the banking sector.
“The president believes that if you’re responsible for the demise of one bank, you shouldn’t be able to just turn around and lead another,” a White House fact sheet said.
The banking business may be subject to rules set by Congress. A comprehensive Wall Street reform measure was passed by US lawmakers two years after the financial crisis of 2008. However, several of its rules were reversed in 2018 with agreement from both parties.
When SVB failed at the end of the previous week, it was the 16th-largest bank in the US. It had invested a large portion of its capital in US government bonds, whose value decreased as interest rates rose. The company specialised in lending to technology start-ups and the venture capitalists who fund them.
Biden’s plea for accountability was supported by Senator Elizabeth Warren, a progressive Democrat who has been vociferous in her opposition to deregulation of the banking industry.
Warren stated on Twitter that Biden is fighting for bank CEOs to be held responsible for their mistakes.
“We need to recoup every dollar of their unfair compensation and bonuses, impose serious fines, and make sure that these executives never again work in the financial sector,” she said. “Congress needs to act now.”
The downfall of SVB, according to some Conservatives, was caused by the bank’s concentration on liberal cultural concerns, such as diversity.
Republican Congressman Andy Biggs stated on Twitter that “No bailouts for SVB (Silicon Valley Bank)”.
Instead of genuine financial management, “its resources should not have been blown on woke/DEI [diversity, equality and inclusion] activities,” he wrote in his piece. Also, the fact that Biden’s extravagant spending is upsetting interest rates is not helpful.
