By
Zeke Miller
and
Michelle Chapman
- The Associated Press
President Joe Biden has asked Congress to impose tougher sanctions against bank executives that have failed in recent days, including measures to recover part of their financial compensation and to make it more difficult for them to return to work in the sector.
SVB Financial Group, the parent company of Silicon Valley Bank, filed for bankruptcy on Friday, and markets fell sharply again on fears of the crisis.
Biden proposed to Congress that he allow the Federal Deposit Insurance Corporation (FDIC), which supports customer deposits in the event of bankruptcy, to force executives to return their matching funds or prohibit them from working at other banks.
“Strengthening accountability is an important deterrent to future mismanagement,” Biden said in a statement, “Congress must act to impose tougher penalties on top bank executives whose mismanagement contributed to the bankruptcy of their institutions”.
[Group of banks agree to a bailout of First Republic of $30,000 million dollars to avoid financial crisis]
President Joe Biden at the White House on March 17, 2023. Evan Vucci / AP
Currently the FDIC can only recover compensation from executives of the largest banks, and other sanctions require that they have acted with “recklessness” or “willful or sustained disregard” of bank finances.
Biden wants Congress to allow regulators to penalize executives at a lower legal threshold: for being "negligent."
The White House highlighted reports that Silicon Valley Bank CEO Gregory Becker sold $3 million worth of shares in the bank days before it collapsed.
Biden wants the FDIC to have the authority to take that compensation away from him.
SVB Financial Group files for bankruptcy
The announcement of SVB Financial Group's bankruptcy declaration was something to be expected since the bank came under the supervision of federal banking regulators last Friday.
Both the bank and its chief executive and chief financial officer were the subject of a class-action lawsuit alleging that the company failed to warn its customers about the risk they faced if interest rates rose sharply, as has been the case because of policies of the Federal Reserve against inflation.
The bankruptcy filing now opens a legal battle over the bank's remaining assets between its creditors and regulators, who are seeking to recover money from the deposits.
The Treasury Secretary told Congress that the US banking system remains "solid"
March 17, 202301:51
The SVB Financial Group said it has about $2.2 billion in liquidity, and other securities and assets it plans to sell.
The bankruptcy proceeding, he said, will allow it to "preserve value while it evaluates strategic alternatives," said William Kosturos, the company's director of restructuring.
[Can the financial crisis of 2008 be repeated?]
The closure of Silicon Valley Bank, in California, on March 10 and of Signature Bank, in New York, two days later revived the specter of the financial crisis that plunged the United States into the Great Recession almost 15 years ago and dragged the world whole in his fall.
During the 2008 crisis, the parent companies of the failed banks Washington Mutual and IndyMac also filed for bankruptcy in the days after their operations failed.
Determined to restore public confidence in the banking system, the federal government took steps last weekend to protect all deposits, including those exceeding the FDIC's $250,000 individual account limit.
