WASHINGTON — President Biden called on Congress to pass a number of measures that would expand the Federal Deposit Insurance Corp.'s ability to punish the executives of failed banks.
"When banks fail because of 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 statement.
The call comes after Biden promised to push for
Specifically, Biden is asking Congress to strengthen the FDIC's authority to claw back compensation — including from stock sales — from the executives of failed banks of a similar size to Silicon Valley Bank and Signature Bank. Currently, the FDIC has that ability under the Dodd-Frank Act's special resolution authority, which applies only to the largest financial institutions.
Biden's proposal would also expand the FDIC's authority to prevent executives from holding jobs in the banking industry after their bank fails. The FDIC now has the ability to bar executives from holding jobs at other banks only if they engage in "willful or continuing disregard for the safety and soundness" of the institution.
Biden is calling on Congress to ease the legal standard for using that authority to when a bank is put into FDIC receivership.
"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 White House said in a statement.
Biden is also asking that Congress allow the FDIC to seek monetary penalties from "negligent executives of failed banks when their actions contribute to the failure of their firms," an expansion from the current standard where the FDIC can seek monetary damages only when bank executives "recklessly" pursue a pattern of "unsafe or sound" practices."
Senate Banking Committee Chairman Sherrod Brown, D-Ohio, echoed Biden's calls for tougher penalties for the executives of failed banks, saying that the country needs "stronger rules to rein in risky behavior and catch incompetence."
"Our job on our committee is oversight, and we will be looking at all the ways we can protect working families' money from risky bets that didn't pay off in Silicon Valley or on Wall Street," Brown said in a statement. "That includes holding accountable the executives who ran this bank into the ground and the regulators tasked with overseeing them, and it includes working to reform our laws to better protect workers, small businesses, and taxpayers from corporate greed."
