President Joe Biden on Friday urged Congress to pass legislation that would give the Federal Deposit Insurance Corporation authority to “claw back” executive pay at failed banks and to bar the executives from jobs in the banking industry.
As the fallout continues from the federal rescue of depositors in Santa Clara, Calif.-based Silicon Valley Bank and New York City-based Signature Bank, Biden said he wants to hold the executives accountable. The executives have already been removed from their positions and the regulators’ rescue of depositors last week doesn’t extend to shareholders or certain unsecured debt holders.
“No one is above the law — and strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement. “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.”
The White House said in a separate fact sheet that Congress should give the FDIC authority to recover compensation, including gains from stock sales, from executives at banks like SVB and Signature.
The fact sheet cited reports that SVB CEO Greg Becker sold more than $3 million in shares days before the FDIC took control. It said the FDIC currently can only recover such money at the largest financial institutions. “The authority should be extended to cover a broader set of large banks — including banks the size of Silicon Valley Bank and Signature Bank,” the fact sheet said.
Biden is also urging Congress to bar executives from jobs in the industry when their banks enter receivership. The FDIC can now bar them only if they engage in “willful or continuing disregard for the safety and soundness” of their bank.
“The President believes that if you’re responsible for the failure of one bank, you shouldn’t be able to just turn around and lead another,” the fact sheet said.
Congressional progressives have complained that a 2018 law redefined what is considered a systemically important financial institution, removing SVB and other smaller regional banks from the category. Advocates of repeal of the law said regulators would have caught SVB’s problems if it remained a systemically important bank. But Republicans and Democrats who voted for the law in 2018 disagree, saying the law had little to do with SVB’s collapse.
Senate Banking Chairman Sherrod Brown, D-Ohio, said this week he saw no chance of repealing the 2018 law in the current Congress.