Joe Biden has decided to show a strong hand with the bankers. The fall of Silicon Valley Bank and Signature Bank have generated financial instability and threaten to plunge the United States into a recession. The President of the United States does not want the stock market and financial crisis caused by these entities to come free to his managers. For now, he has decided that they should be removed, but, in addition, Biden has asked Congress on Friday to give more powers to punish those responsible for the fall of financial institutions.
In Biden’s view, Congress “can and should do more to hold top bank executives accountable.” What the president is demanding is a law that strengthens the powers of the federal government and, in particular, of the Federal Deposit Insurance Corporation (FDIC). This body acts as a deposit guarantee fund, but is also in charge of intervening in troubled banks.
“When banks fail due to mismanagement and excessive risk-taking, it should be easier for regulators to recover severance payments from executives, impose civil penalties, and bar executives from ever working in the banking sector again,” he said. the White House through a statement.
Both entities are now under FDIC administration. Biden assured that taxpayers should not suffer losses from the rescue of the two banks, but that it will be the fees that the banks pay to that federal agency that will cover the cost. The FDIC, the Securities and Exchange Commission (SEC), and the Department of Justice have the authority to investigate the circumstances that led these banks to go into receivership, and to take action against the management of those banks and, indeed, that investigation is ongoing.
But Biden believes that the powers of supervisors should be expanded. In particular, he calls on Congress to expand the FDIC’s authority to recover compensation, including proceeds from stock sales, from executives at failing banks like Silicon Valley Bank and Signature Bank. The White House echoes the sale of shares by the CEO of Silicon Valley Bank worth more than three million dollars just a few days before the bank was intervened and calls on Congress to expand the powers of the FDIC to expressly cover cases like that.
With the legislation in place, the FDIC has limited ability to recover any compensation or proceeds from the sale of shares that top executives at Silicon Valley Bank or Signature Bank may have received shortly before their banks were seized. That’s because the FDIC only has recovery authority under the special resolution power of the Dodd-Frank Act, which applies to the largest financial institutions, the White House explains. Biden wants those powers to be extended to midsize banks like Silicon Valley Bank and Signature Bank.
In addition, the White House also wants to strengthen the FDIC’s authority to bar executives from holding jobs in the banking sector when their banks go into receivership. With the law in force, you can only do so if the directors have incurred in “deliberate or continued disregard for the safety and soundness” of your bank. Biden believes that this power should be expanded so that the directors of the banks intervened by the FDIC can be disqualified: “The president believes that if you are responsible for the failure of a bank, you should not be able to turn around and run another without further ado ”.
Third, the White House also wants Congress to expand the FDIC’s authority to fine failed bank executives. Under current law, the FDIC can impose financial penalties on bank officers who “recklessly” engage in a pattern of “unsafe or unsound” practices, regardless of whether or not the bank goes into receivership or receivership. . The White House is now saying that Congress should expand the FDIC’s power to seek fines from negligent executives of failed banks when their actions have contributed to the bankruptcy of their entities.
To push those measures forward, Biden would need the support not only of Democrats, but also of Republican congressmen, who have a majority in the House of Representatives and the ability to block such an initiative in the Senate.
Five Days agenda
The most important economic appointments of the day, with the keys and the context to understand their scope.
RECEIVE IT IN YOUR MAIL
Subscribe to continue reading
Read without limits
#Biden #calls #tougher #punishments #managers #intervened #banks