WASHINGTON — President Joe Biden on Friday called on Congress to pass legislation that would make it easier for the government to reverse bonuses and gains from stock sales collected by executives whose actions are causing banks to fail in response to the recent collapse of two banks.
Biden is also asking Congress to make it harder for banking executives to get other jobs in the industry after the institutions they run have failed. In a further step aimed at preventing risky actions that endanger a bank’s health, the President wants Congress to expand the FDIC’s ability to punish executives.
Taken together, the proposals Biden has put forward address the misconduct of wayward bank executives. Systemic changes aimed at strengthening the banking system as a whole were left out. The president’s policy advisers are still working on a plan to strengthen banking regulation and are expected to announce it in the coming weeks, a White House official said Friday.
“The law limits the government’s powers to hold executives accountable,” Biden said in a prepared statement released a week after the government took over the failed Silicon Valley bank. “When banks fail due to mismanagement and excessive risk-taking, it should be easier for regulators to recover executive compensation, impose civil penalties and again ban executives from working in the banking industry.”
“Congress must act to impose tougher penalties on senior bank executives whose mismanagement has contributed to the failure of their institutions,” the president added.
Biden’s announcement follows a promise he made Monday outlining the steps the government would take to ensure those who deposited funds at Silicon Valley Bank and Signature Bank recover . He said he wants to take responsibility for executives who put banks at risk, rocked the nation’s financial system and caused bank stocks to plummet.
“No one is above the law — and strengthening accountability is an important deterrent to preventing future mismanagement,” Biden said.
The immediate question that arises from Biden’s proposal is whether he can persuade Congress to take the actions he believes are needed to prevent future bank failures and preserve the nation’s financial system.
Biden’s party lost control of the House of Representatives in the 2022 midterm elections and now holds a narrow majority in the Senate.
House Speaker Kevin McCarthy declined to comment Friday when asked by NBC News if he supports legislative action to claw back bonuses from Silicon Valley bank executives.
“I’m going to go through and look at all the things that happened at Silicon Valley Bank and other banks that failed,” said McCarthy, R-Calif. “We will have Financial Services conduct a series of hearings with all the information.”
The chair of the House Financial Services Committee is Rep. Patrick McHenry, RN.C., an ally of McCarthy.
Even getting the Democrats to line up could prove difficult. The banking lobby is a powerful force on Capitol Hill. 2018 some moderate Senate Democrats aligned with the Republicans in rolling back certain rules for mid-sized banks that were put in place after the 2008 financial collapse.
Many of these Democrats are stand by their votes for 2018and said it was too early to know if new regulations were needed.
Sen. Sherrod Brown, D-Ohio, the chair of the Senate Banking Committee, said he had low expectations of passing a bill to reverse the 2018 deregulation measures. But he said there could be a bipartisan route to the 60 votes that required to break a filibuster over other measures.
“I think we can do the clawbacks. I think that could be bipartisan, we could do that — recoveries from the executives,” Brown said Thursday, adding that the 2010 Dodd-Frank legislation may already contain some power for recoveries under current law.
He said he was definitely “very interested” in legislative action against clawbacks, but cautioned, “I don’t know what else we can do.” Because I know the banking lobbyists are pretty powerful here.”
Rep. Ro Khanna, a California Democrat whose district includes Silicon Valley Bank’s headquarters, suggested that Democrats could try to win over moderate Republicans like Utah Senator Mitt Romney if they try to lock votes who are needed to ensure more accountability among bank managers.
“I don’t know if someone like Sen. Romney on the other side would be open to that kind of systemic reform,” Khanna said. But it’s worth exploring.”
This article was originally published on NBCNews.com
Source : news.yahoo.com