Senator Elizabeth Warren wants banking to be “boring” again after the failures of Silicon Valley Bank and Signature Bank.
“What I want to do is get banking back to where it’s supposed to be, and that’s boring,” Warren, D-Mass., said on CNBC’s “Squawk on the Street” Friday morning. “Banking is supposed to be there to put your money in and you can count on it to be there, and that’s true if you’re a family, that’s true if you’re a small business.”
Warren said the problem started under the Trump administration, when bank CEOs lobbied Congress to weaken regulation for regional and mid-sized banks. Silicon Valley Bank was among those campaigning for the changes, Warren pointed out, noting that the bank’s profits have skyrocketed over the years that regulations have been relaxed.
During a hearing this week, Warren, a longtime critic of the financial industry, urged the country’s top banking regulators how SVB and Signature could fail virtually overnight earlier this month. Financial regulators closed the two banks citing systematic contagion fears after bad news sparked bank runs. The failed banks disproportionately served startup and cryptocurrency companies.
The incident was the largest US bank failure since the 2008 financial crisis and the second and third largest bank failures in US history.
In the weeks since the banking collapse, Warren has authored or sponsored three new banking supervision bills.
The first would reverse a Trump-era law that weakened supervision of mid-sized banks. The second would create an inspector general position within the Federal Reserve, and the third would ban executives of public companies from selling stock options for three years.
“We want to balance the incentives,” Warren said on Friday. “I have a bipartisan reclamation bill and the whole idea is to say to these CEOs going forward, ‘Hey, if you charge this bank on a gamble and the bank blows up, you’re going to lose this fancy bonus, you’re going for this big salary lose, you will lose those stock options.'”
Banking shouldn’t be an industry that attracts risk takers, Warren said.
“I really want to say to the CEOs of banks, if you’re the type of guy who wants to roll these dice and take big risks, don’t go into banking,” Warren said. “Banking is about steady profits. Banks should absolutely be able to make a profit, but when banks take risks, they put depositors at risk, they put small businesses at risk, and ultimately, as we’ve learned with these million-dollar banks, they put our entire economy at risk.”
Warren chided bank regulators for not doing enough and called on Congress to join her in reinstating safeguards.
“You have to look at everything that’s broken here,” Warren said. “We allowed regulators to take their eyes off the ball. Banking is a regulated industry for a reason, as it impacts the rest of the economy. Just like Joe Biden said yesterday – they need to start tightening these regulations right away. “
Source : www.cnbc.com