Biden Calls on Congress to Strengthen Bank Regulations After Silicon Valley Bank Collapse
President Joe Biden is calling on Congress to pass legislation that would strengthen regulations on bank executives, making it easier for regulators to hold them responsible for their mismanagement of banks. This comes after the recent collapse of Silicon Valley Bank and Signature Bank, which sent shockwaves through the financial system.
Biden said in a statement that “no one is above the law – and strengthening accountability is an important deterrent to prevent mismanagement in the future. 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.”
He also called on Congress to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing. In addition, he asked for the Federal Deposit Insurance Corporation (FDIC) to be able to fine executives and also make it tougher for banking executives to land other jobs in the industry after the failure of institutions they lead.
In response to the bank failures, Treasury Secretary Janet Yellen said the nation’s banking system is “sound,” leading to a surge in stocks for several banking institutions. Meanwhile, a rescue package of $30 billion was provided to First Republic Bank from 11 of the largest U.S. banks.
However, some moderate Senate Democrats who voted to loosen regulations on midsize banks in 2018 are standing by their votes in the wake of Silicon Valley Bank’s collapse, joining Republicans in resisting enhanced scrutiny for financial institutions.
Depositors are insured up to $250,000 per ownership category by the FDIC. Any money beyond the $250,000 limit is considered uninsured, meaning you might not get all your money if a bank shuts down.
In his speech, Biden reassured the public the situation is contained, saying “Americans can have confidence that the banking system is safe.” He also emphasized that customers would have access to their money and that taxpayers wouldn’t be on the hook for the administration’s actions to contain the collapse.
It remains to be seen if Republicans will get over their usual wariness towards regulation and back the move, even after the shakiness the US financial system showed in recent weeks.
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