(Yahoo!Finance) - President Biden is calling on Congress to give regulators the authority to claw back executive compensation in the wake of a string of bank failures.
"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 said in a statement.
"Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing."
Biden's comments come after the president said Monday "no one is above the law" and those responsible for the failures should be held accountable.
Senate Banking Committee Chair Sherrod Brown (D-OH) is also calling for stronger rules to rein in risky behavior of banks, and said he and the committee will look at ways to hold executives accountable.
"We need stronger rules to rein in risky behavior and catch incompetence," Brown said. "Our job on our committee is oversight, and we will be looking at all the ways we can protect working families' money from risky bets that didn’t pay off in Silicon Valley or on Wall Street."
Waters calls on regulators to finish 'long overdue' process
House Financial Services Committee ranking member Rep. Maxine Waters (D-CA) also sent a letter Friday to Fed Chair Jay Powell, FDIC Chair Martin Gruenberg, and SEC Chair Gensler urging them use the full extent of their authority to hold Silicon Valley Bank and Signature Bank executives accountable.
Waters also urged regulators to explore their ability to claw back compensation.
"I ask that any punitive action consider profits or gains these executives may have made by selling their stock in the days and weeks leading up to the bank's failures, whether the sale was due to 10b5-1 plans, direct sales, or through broker discretionary accounts, through derivatives or hedging activities," the letter reads.
Waters also said she is working to develop and enact legislation to advance President Biden's direction to Congress.
"Your agencies must finish that long overdue rule-making this year and ensure it also includes a robust clawback requirement and consider taking further measures so that executives are not rewarded with big bonuses if their bank is mismanaged or fails," the letter reads.
Along with Waters, Senator Elizabeth Warren (D-MA) also called for clawbacks of executive compensation earlier this week. Both have blamed a Trump-era rollback of capital requirements for small and mid-sized banks for the bank failures. Warren, along with Rep. Katie Porter (D-CA), has introduced legislation to repeal those changes.
The actions come as reports surface Silicon Valley Bank's CEO cashed out of stock and stock options just weeks before the bank's failure.
Officials are trying to contain problems from the failure of Silicon Valley bank and Signature Bank from rippling through the banking system and infecting other banks.
Late last Sunday night, the Treasury Department, along with the FDIC and Federal Reserve, announced it would backstop all deposits at Silicon Valley Bank, as well as seize Signature Bank, as cracks in the financial system rocked markets.
Treasury Secretary Yellen said during testimony before the Senate Finance Committee on Thursday policymakers need to examine the liquidity requirements needed for a bank with such a heavy reliance on uninsured, runnable deposits.
By Jennifer Schonberger · Senior Reporter