Biden Urges Congress to Pass Legislation Regulating Banks

What’s the story?

• President Biden has asked Congress to pass legislation granting financial regulators new powers to enforce civil fines, recover compensation from executives at failed banks, and ban them from further employment in the financial sector.
• Following the collapse of Silicon Valley Bank, the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) announced that clients of Silicon Valley Bank would be protected from any losses.
• The government's intervention in the banking system has been the largest since the 2008 financial crisis.

What changes does Biden want?

• President Biden wants to enhance the regulatory powers of the FDIC, a federal agency that safeguards deposits in U.S. banks and thrifts in case of bank failures. 
• Currently, under the Dodd-Frank Act, the FDIC clawback authority only applies to the largest banks. In a White House statement, Biden calls on Congress to expand these powers to include more banks. 
• Biden also wants to increase the FDIC’s ability to fine executives responsible for a bank's collapse and reduce the legal bar that must be met in order to ban them from working in the industry.
• President Joe Biden said in a statement released by the White House:

“No one is above the law — and strengthening accountability is an important deterrent to prevent mismanagement in the future. The law limits the administration’s authority to hold executives responsible.”

What is the likelihood of these changes being implemented?

• In 2018, the Senate passed a law to roll back regulations enacted after the 2008 financial crisis, which removed Silicon Valley Bank and other smaller regional banks from regulatory scrutiny.
• In 2023, Republicans control the House and tend to oppose pushes to strengthen federal regulations. 
• In response to potential new regulations, Senator Steve Daines (R-MT) said in a statement:

“What we don’t need is more onerous regulations on well-managed and sound Montana banks that didn’t fail.”

• Senate Banking Chairman Sherrod Brown (D-OH) said he saw no possibility of Congress overturning the 2018 law:

"Bank lobbyists, they won't let Republicans do any of this. That's why we need a Fed that will look out for consumers, that will look out for the tax-paying public.”

What do you think? Do you support imposing fines on or banning failed bank executives from working in the industry?

-- Laura Woods

(Photo Credit: Flickr/The White House)