Joe Biden is trying to make it easier to punish directors of bankrupt US banks

Joe Biden is calling on Congress to make it easier for regulators to punish executives at bankrupt banks, including by recouping profits from stock sales and banning disgraced bosses from working in the industry.

The US president said he is “determined to hold accountable to those responsible for this mess,” in a statement released Friday, just a week after the collapse of California-based lender Silicon Valley Bank.

“No one is above the law – and strengthening accountability is an important deterrent to preventing mismanagement in the future,” he added.

The White House has asked Congress to expand the powers of the Federal Deposit Insurance Corporation, a U.S. banking regulator, to recover fees, including profits from the sale of stock by executives at bankrupt regional banks such as SVB and Signature Bank, a New York-based lender that collapsed over the weekend. Current law only allows the FDIC to recover income from executives at larger banks. Greg Becker, the former CEO of SVB, sold $3.6 million worth of shares of the bank on Feb. 27 under a previously agreed trading plan, less than two weeks before SVB failed.

The government also wants to expand the FDIC’s authority to ban bosses of failed banks from holding jobs with other lenders. Currently, the FDIC may only prohibit disgraced executives from holding similar jobs if they are guilty of “intentional or persistent disregard for the safety and soundness” of their bank. But the White House said Congress should “lower the legal standard” that applies to all lenders in receivership.

“The president believes that if you’re responsible for the failure of one bank, you shouldn’t just turn around and run another,” the White House said in a memo.

The administration has also said Congress should make it easier for the FDIC to impose fines on bankrupt bank executives.

Sherrod Brown, the Democratic senator from Ohio who chairs the powerful Senate banking committee, welcomed Biden’s statement, saying, “We need tougher rules to curb risky behavior and catch incompetence.”

Lawmakers disagree on how to respond to the collapse of SVB and Signature. Progressive Democrats have called for the reversal of a 2018 law signed by then-President Donald Trump that watered down the 2010 Dodd-Frank financial regulation reform. But several senior Democrats have been hesitant to sign up, while most Republicans have rejected the idea of ​​new rules.

At the same time, many Republicans have blamed Biden and the Democrats for the latest bank failures, trying to link the government’s fiscal policies to the rising interest rates blamed on the banks’ insolvency.

There are some signs that legislators from both sides may agree on punishing the directors of failed banks. Richard Blumenthal, the Democratic senator from Connecticut, has introduced legislation that would allow regulators to reclaim bonuses and profits from stock sales within 60 days of a bank’s bankruptcy.

Republican Senators Josh Hawley and Mike Braun also introduced a bill that would allow the FDIC to reclaim bonuses paid to executives of bankrupt banks.

“This is an excellent first step and this is all long overdue,” Dennis Kelleher of the consumer group Better Markets said of Biden’s statement. “Anything that punishes executives for reckless behavior and misconduct is welcome.”

Not getting money back “is like taking a bank robber’s getaway car, but not the money he stole,” Kelleher added.

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