Biden calls on Congress to tighten laws to claw back executive pay, levy penalties in bank failures

President Joe Biden called on Congress to give regulators more authority to claw back pay and penalize executives at distressed banks “whose mismanagement contributed to their institutions failing.”

“No one is above the law – and strengthening accountability is an important deterrent to prevent mismanagement in the future,” Biden said in a statement Friday, days after federal bank regulators stepped in to guarantee deposits at two banks that failed over the weekend. “When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again.”

Biden noted his powers to hold executives accountable were constrained by the law and asked Congress step in.

“Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing,” Biden said.

The president is asking Congress to broaden the Federal Deposit Insurance Corporation’s ability to claw back compensation, including from the sale of stocks, from executives at failed banks. The White House said SVB’s CEO reportedly sold more than $3 million in shares mere days before the FDIC took it over. Under current Dodd-Frank legislation, the FDIC only has the ability to recoup these funds at the nation’s largest financial institutions, not large and medium sized banks like the ones that failed over the weekend.

Biden also called on Congress to expand the FDIC’s authority to bar executives whose banks are under receivership from working in the banking sector and bring fines against executives of failed banks. All three of the White House’s proposals seek to penalize banking executives for the risky behaviors leading up to the bank failures.

The nation’s top bank regulators on Sunday announced the FDIC and Federal Reserve would fully cover deposits, including those above the $250,000 limit covered by traditional FDIC insurance, at both failed banks: Silicon Valley Bank and Signature Bank. The agencies noted that Wall Street and large financial institutions — not taxpayers — to foot the bill through a special fee assessed against federally insured lenders.

A majority of SVB’s customers were small tech companies, venture capital firms and entrepreneurs who used the bank for day-to-day cash management to run their businesses. Those customers had $175 billion on deposit with tens of millions in…