President Joe Biden is looking for new tools to punish failed bank executives in the wake of the collapse of Silicon Valley Bank and Signature Bank.
Biden argued Friday that the government should be able to reclaim the compensation received by executives whose mismanagement or excessive risk-taking contributed to a bank’s downfall. It should also be easier to impose civil penalties against such executives and to ban them from working in the industry again, he added.
“No one is above the law — and strengthening accountability is an important deterrent to prevent mismanagement in the future,” the president said in a statement.
“The law limits the administration’s authority to hold executives responsible … Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing,” Biden said.
Financial filings show Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of the company’s shares less than two weeks before its demise.
The collapse of Silicon Valley Bank, which catered to tech-startups, is the largest bank failure since the 2008 financial crisis. Experts previously told ABC News regulators missed red flags at the bank, including its reliance on uninsured deposits and on investments in government bonds that lost value due to high interest rates.
On Thursday, Treasury Secretary Janet Yellen told lawmakers the bank’s downfall was caused by a massive run on uninsured deposits that led to liquidity problems. She also called for a reexamination of regulatory rules, which have come under fire from lawmakers of differing political stripes.
The abrupt demise of Signature Bank and Silicon Valley Bank last week stirred financial fears, prompting the Biden administration to take forceful action to stabilize the banking system — including guaranteeing all deposits at the two banks.
Yellen defended the federal response during a Senate hearing on Thursday, telling lawmakers it was necessary to stem the risk of other bank runs.
“​​We felt that there was serious risk of contagion that could have brought down and triggered runs on many banks,” she said. “Given that our judgment is that the banking system overall is safe and sound, depositors should have confidence in the system, and we took these actions.”
On Monday, Biden reassured Americans the system was “safe” and there was no need to panic.
But fallout continued this week as 11 big banks stepped in to rescue First Republic Bank. The banks, including JPMorgan and Citigroup, provided a $30 billion package to prevent First Republic from collapsing.