Biden takes aim at failed bank executives' pay, asks Congress to act

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U.S. President Biden hosts Ireland's Prime Minister (Taoiseach) Varadkar at the White House in Washington
U.S. President Joe Biden speaks as he meets with Ireland's Prime Minister (Taoiseach) Leo Varadkar in the Oval Office at the White House in Washington, U.S., March 17, 2023. REUTERS/Evelyn Hockstein

WASHINGTON, March 17 (Reuters) - U.S. President Joe Biden on Friday called on Congress to give regulators greater power over the banking sector, including leveraging higher fines for managers, clawing back executives' compensation and barring officials from failed banks, according to a statement released by the White House.

"No one is above the law," Biden said in the statement, "and strengthening accountability is an important deterrent to prevent mismanagement in the future."

The current law "limits the administration’s authority to hold executives responsible," he said.

Specifically, Biden is asking Congress to give the Federal Depository Insurance Corp greater authority to claw back compensation, "including gains from stock sales – from executives at failed banks like Silicon Valley Bank and Signature Bank," the White House said in a second statement.

Silicon Valley Bank (SIVB.O) CEO Greg Becker sold $3.6 million worth of shares in late February, about two weeks before the bank entered FDIC receivership, Bloomberg and CNBC reported.

"The President urges Congress to expand the FDIC’s authorities to expressly cover cases like this" the White House statement said, citing Becker's stock sales.

The president is also asking Congress to give the FDIC more authority to ban bank executives from the industry when their banks go into receivership, and to fine bank managers whose banks fail.

Currently, the FDIC is limited to clawing back executive pay only if one of the nation's largest institutions were to fail, and can only bar executives from the industry if they were found to be engaging in "willful and continuing disregard" in running a bank safely.

Separately, the 2010 Dodd-Frank financial reform law also directed regulators to draft new rules aimed at ensuring banker pay packages do not encourage them to take on unnecessary risk. But that multiagency effort has been stalled for years.

Democrats who have been calling for tougher banking regulation were quick to hail Biden's statement, but it is unclear whether it has bipartisan support in Congress.

"We need to claw back every penny of their unjust pay and bonuses, impose real penalties, and ensure these executives never work in the banking industry again," Democratic Senator Elizabeth Warren said.

Reporting by Jeff Mason and Costas Pitas; writing by Susan Heavey and Heather Timmons; Editing by Chizu Nomiyama and Chris Reese

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Jeff Mason is a White House Correspondent for Reuters. He has covered the presidencies of Barack Obama, Donald Trump and Joe Biden and the presidential campaigns of Biden, Trump, Obama, Hillary Clinton and John McCain. He served as president of the White House Correspondents’ Association in 2016-2017, leading the press corps in advocating for press freedom in the early days of the Trump administration. His and the WHCA's work was recognized with Deutsche Welle's "Freedom of Speech Award." Jeff has asked pointed questions of domestic and foreign leaders, including Russian President Vladimir Putin and North Korea's Kim Jong Un. He is a winner of the WHCA's “Excellence in Presidential News Coverage Under Deadline Pressure" award and co-winner of the Association for Business Journalists' "Breaking News" award. Jeff began his career in Frankfurt, Germany as a business reporter before being posted to Brussels, Belgium, where he covered the European Union. Jeff appears regularly on television and radio and teaches political journalism at Georgetown University. He is a graduate of Northwestern University's Medill School of Journalism and a former Fulbright scholar.

Thomson Reuters

Covers financial regulation and policy out of the Reuters Washington bureau, with a specific focus on banking regulators. Has covered economic and financial policy in the U.S. capital for 15 years. Previous experience includes roles at The Hill newspaper and The Wall Street Journal. Received a Master's degree in journalism from Georgetown University, and an undergraduate degree from the University of Notre Dame.