Senator Elizabeth Warren is proposing that executives should face financial and legal repercussions for their part in the impending banking crisis following this week’s closure of Silicon Valley Bank and Signature Bank by regulators seeking to avert a financial catastrophe.
In an opinion piece for The New York Times, Warren argued that the banks suffered from a toxic mix of risky management and weak supervision, allowing executives to exploit banking regulations rollbacks during the Trump administration to the detriment of depositors who trusted the stability of the institution.
Greg Becker, the president, and CEO of SVB, received $9.9 million in pay last year, including a $1.5 million incentive for increasing the risk and profitability of the bank. Signature Joseph DePaolo received $8.6 million In his writing, Warren criticizes the directors of the bank’s failures. All of that should be recouped, along with bonuses given to other bank officials.
CEOs from corporations from Goldman Sachs to Apple, have taken wage cutbacks amid the current economic recession. Recent increases in CEO compensation have contributed to an expanding economic divide. Since the 2008 financial crisis, the failure of Silicon Valley Bank has become the largest bank failure in the nation.
Sen. Elizabeth Warren Calls for Major Banks Hearing
In the wake of the bankruptcies of two large banks, Elizabeth has requested that the Senate convene hearings on the recent collapse of both institutions.
The Hill received confirmation from Sarafina Chitika, Warren’s deputy communications director, saying the senator thinks the body ought to schedule hearings with testimony from the CEOs of Silicon Valley Bank and Signature Bank, both of which failed over the weekend.
The Huffington Post’s senior politics correspondent Igor Bobic first the news of Warren’s request for hearings. According to Bobic, Warren stated that senators should question the CEOs of the firms about what went wrong with them and their participation in attempting to have Dodd-Frank Wall Street Reform and Consumer Protection Act laws repealed “so they could load up their banks with risk.”
The Dodd-Frank Act was passed by Congress and signed into law by President Obama in 2010 to tighten financial rules and stop the kinds of massive bank failures that were seen at the beginning of the Great Recession in the United States in 2008.
Silicon Valley Bank fell at the end of last week after it could not satisfy all of its withdrawal requests from clients amid a bank run because it did not have enough cash on hand.
When the Federal Deposit Insurance Corporation, which ordinarily protects up to $250,000 per account at the banks it controls, took control of the bank on Sunday, the federal government reacted.
On that same day, President Biden also declared that bank depositors would be able to retrieve their funds regardless of whether they had more than the $250,000 maximum. Yet he also promised that taxpayers would not foot the bill for any financial bailout.