Biden Asks Congress to Go After Failed Bank Executives Who Cashed Out

President Joe Biden called for Congress to make it easier for federal regulators to punish the executives of failed banks who cashed out before the collapse.

Referencing reports that Silicon Valley Bank’s CEO sold more than $3 million in stock just before last week’s collapse, Biden is asking for legislation that will give the Federal Deposit Insurance Corp. (FDIC) more teeth to go after bankers who cash out before their firms fail, according to a White House release.

The FDIC took over SVB on March 10 after a run on its deposits triggered by the announcement that it had lost $2 billion on a portfolio of mainly U.S. Treasuries. Subsequently, the Federal Reserve unveiled an emergency lending program designed to stabilize the banking sector. 

While the FDIC can currently “claw back” compensation and proceeds from stock sales from executives of the nation’s largest institutions under the Dodd-Frank Act, Biden is asking Congress to apply the same rules to a larger set of banks, such as SVB and Signature Bank, which was also seized by the FDIC last week. 

In addition to coming after compensation, Biden wants the FDIC to be able to levy more fines against executives at failed banks. The FDIC can levy fines for reckless behavior, regardless of whether the bank enters receivership. But Biden said that power should be expanded to executives at any bank where federal regulators have to step in. 

Likewise, Biden also wants to expand the FDIC’s power to ban failed bank executives from taking on similar roles in the financial industry. Under current law, the FDIC can ban executives who have acted in “willful or continuing disregard” for the bank’s health. Biden is asking for that threshold to be lowered to extend these bans to executives from banks that are taken over by the FDIC.

“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 statement said.