Silicon Valley Bank collapse spurs calls for changes by Congress
From protecting consumers from added fees to clawing back executives’ bonuses, members of Congress want to make changes to the banking system in the wake of Silicon Valley Bank’s collapse.
First, Senator Elizabeth Warren and Congresswoman Katie Porter want to reinstate stricter oversight. In 2018, Congress passed a bipartisan bill which increased the threshold for certain protections like stress tests from banks with 50 billion in assets to 250 billion.
The Secure viable banking act would repeal those deregulations.
Sen. Dick Durbin, D-Il: “Let’s make sure these banks are playing by the rules and making sensible decisions so that the depositors and taxpayers don’t end up holding the bank.”
But Republicans and even moderate Democrats aren’t willing to support this proposal.
Sen. Kevin Cramer, R-N.D.: “I think that’s a bit of a knee jerk reaction. I don’t support it, again, liquidity is the issue here. And, and not, you know, whether it’s capital requirements. Clearly that wasn’t the problem here.”
To make all Silicon Valley Bank depositors whole, the Biden Administration is imposing what’s called a special assessment on banks. Senator Josh Hawley says that’s a fancy way of saying fees. So he’s bringing a bill forward to stop banks from passing government imposed fees on to consumers.
Sen. Josh Hawley, R-Mo.: “If a Missouri Community Bank failed, I promise you what the line would be from all the DC lobbyists is Oh, that’s just business. You know, that’s creative destruction. That’s the market. But when it is a Silicon Valley Bank full of tech billionaires who are Uber politically connected, oh, no, then it’s systemic risk, then it’s a contagion.”
Senator Richard Blumenthal is introducing his legislation that would take back bonuses paid to executives just ahead of a collapse. SVB employees received pre-scheduled bonuses the day before the FDIC takeover. A couple weeks ago, the CEO and CFO collectively sold about four million dollars in stock.
Sen. Richard Blumenthal, D-Conn: “They were self dealing, paying themselves bonuses, those bonuses and all self dealing in stock transactions that benefit top management when banks are taken over or to be clawed back.”
The Justice Department is beginning a new program to claw back the bonuses and compensation of failed corporate leaders. It officially begins today, it’s not clear if SVB executives may be some of the first to be impacted. Straight from DC, I’m Ray Bogan.