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gregory becker
Sanders Introduces Bill to Ban Bank Execs From Fed Boards
"The CEOs of the largest banks in America should not be allowed to serve as directors of the main agency we have in this country in charge of regulating those very same financial institutions," the senator said.
Mar 23, 2023
U.S. Sen. Bernie Sanders on Thursday introduced the Federal Reserve Independence Act to prevent bank executives from serving on regional Fed boards that are responsible for regulating their institutions.
The bill—which would also bar the U.S. central bank's board members and employees from owning any stock or investing in any company that is regulated by the Federal Reserve—comes as Fed leadership is under fire for recent interest rate hikes and regulatory rollbacks that preceded the Silicon Valley Bank (SVB) and Signature Bank failures.
"The Fed has got to become a more democratic institution that is responsive to the needs of working people and the middle class."
"I think it would come as a shock to most Americans to find out that Gregory Becker, the CEO of Silicon Valley Bank, who successfully lobbied for the deregulation of his financial institution was allowed to serve as a director of the same body in charge of regulating his bank: the San Francisco Federal Reserve," Sanders (I-Vt.) said in a statement.
"It is clear to me and to the American people, that the CEOs of the largest banks in America should not be allowed to serve as directors of the main agency we have in this country in charge of regulating those very same financial institutions," he asserted. "The Fed has got to become a more democratic institution that is responsive to the needs of working people and the middle class, not just CEOs of some of the largest financial institutions in America."
In a letter to his congressional colleagues about the bill, Sanders highlighted:
Gregory Becker may be the poster child for why we need this legislation, but he is not alone. Incredibly, two-thirds of the directors of these boards are hand-picked by the same bankers that the Federal Reserve is in charge of regulating.
Today, five top executives of financial institutions with over $150 billion in assets currently serve as directors of Federal Reserve banks. For example, the CEO of State Street (a financial institution with nearly $300 billion in assets) currently serves as a director of the Boston Federal Reserve. The CEO of M&T Bank (a financial institution with over $200 billion in assets) currently serves as a director of the New York Fed. The CFO of Ally Bank which has assets of over $180 billion is currently a director of the Richmond Fed. And the CEO of Northern Trust with assets of more than $150 billion currently serves on the Chicago Fed.
Sanders also pointed to a 2011 Government Accountability Office study which "found that allowing members of the banking industry to both elect and serve on the Federal Reserve's board of directors creates 'an appearance of a conflict of interest' and poses 'reputational risks' to the Federal Reserve System."
The senator provided examples involving Stephen Friedman, a former chairman of the New York Federal Reserve board as well as a Goldman Sachs board member and stockholder, and JPMorgan Chase CEO Jamie Dimon, whose bank got $391 billion in assistance while he sat on that same regional Fed board.
Along with seeking support for his bill—which is backed by Americans for Financial Reform, Demos, Revolving Door Project, Public Citizen, Working Families Party, and Association of Flight Attendants-CWA—Sanders is urging Congress to take other action in the wake of the SVB and Signature collapses.
Specifically, the senator is calling for:
- Repealing Title IV of the 2018 bank deregulation legislation;
- Enacting stronger regulations "to ensure the safety and soundness" of the nation's financial system;
- A U.S. Justice Department probe into whether insider trading laws were broken by SVB executives who sold bank stock;
- Clawing back bonuses given to SVB executives just before the collapse; and
- Breaking up banks that are too big to fail to prevent another financial crisis like 2008.
As Sanders put it earlier this month: "We cannot continue down the road of more socialism for the rich and rugged individualism for everyone else. Let us have the courage to stand up to Wall Street, repeal the disastrous 2018 bank deregulation law, break up too big to fail banks, and address the needs of working families not the risky bets of vulture capitalists."
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Warren Demands Probe Into Bank Failures, Urges Biden to Fire Powell
Jerome Powell "has failed," said Sen. Elizabeth Warren. "I don't think he should be Chairman of the Federal Reserve."
Mar 19, 2023
Sen. Elizabeth Warren this weekend called on federal officials to investigate the causes of recent bank failures and urged President Joe Biden to fire Federal Reserve Chair Jerome Powell, whom she has criticized for intensifying financial deregulation and imposing job- and wage-destroying interest rate hikes.
Asked on Sunday by Chuck Todd of NBC's "Meet the Press" about the possibility of Powell imposing yet another interest rate hike despite ongoing market turmoil, Warren (D-Mass.) said, "I've been in the camp for a long time that these extraordinary rate increases that he has taken on, these extreme rate increases, are something that he should not be doing."
Powell "has a dual mandate," said Warren. "Yes, he is responsible for dealing with inflation, but he is also responsible for employment. And what Chair Powell is trying to do, and he has said fairly explicitly, is that they are trying to, in effect, slow down the economy so that, this is by the Fed's own estimate, two million people will lose their jobs. And I believe that is not what the chair of the Federal Reserve should be doing."
Since the Covid-19 pandemic and Russia's invasion of Ukraine disrupted international supply chains—rendered fragile by decades of neoliberal globalization—powerful corporations in highly consolidated industries have taken advantage of these and other crises such as the bird flu outbreak to justify profit-boosting price hikes that far outpace the increased costs of doing business.
"Raising interest rates doesn't do anything to solve" a cost-of-living crisis driven primarily by "price gouging, supply chain kinks, [and] the war in Ukraine," Warren said Sunday. "All it does is put millions of people out of work."
"Jay Powell... has had two jobs. One is to deal with monetary policy, one is to deal with regulation. He has failed at both."
Powell, an ex-investment banker, was first appointed by then-President Donald Trump in 2018 and reappointed by Biden in 2021. Warren noted that she opposed Powell's nomination in both cases "because of his views on regulation and what he was already doing to weaken regulation."
"But I think he's failing in both jobs, both as the oversight and manager of these big banks, which is his job, and also what he's doing with inflation," said Warren.
Asked by Todd if Biden should fire Powell, Warren said: "My views on Jay Powell are well-known at this point. He has had two jobs. One is to deal with monetary policy, one is to deal with regulation. He has failed at both."
"Would you advise President Biden to replace him?" Todd inquired.
"I don't think he should be Chairman of the Federal Reserve," the Massachusetts Democrat responded. "I have said it as publicly as I know how to say it. I've said it to everyone."
Meanwhile, in a Saturday letter, Warren asked Richard Delmar, Tyler Smith, and Mark Bialek—respectively the deputy inspector general of the Treasury Department, acting inspector general of the Federal Deposit Insurance Corporation (FDIC), and inspector general of the Fed's board of governors—to "immediately open a thorough, independent investigation of the causes of the bank management and regulatory and supervisory problems that resulted in this month's failure of Silicon Valley Bank (SVB) and Signature Bank (Signature) and deliver preliminary results within 30 days."
Until the Treasury Department, the Fed, and the FDIC "intervened to guarantee billions of dollars of deposits," the second- and third-biggest bank failures in U.S. history "threatened economic contagion and severe damage to the banking and financial systems," Warren noted. "The bank's executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures."
"But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators," Warren continued.
In 2018, several Democrats joined Republicans in approving Sen. Mike Crapo's (R-Idaho) Economic Growth, Regulatory Relief, and Consumer Protection Act, which weakened the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in the wake of the 2008 financial crisis. Crapo's deregulatory measure, signed into law by Trump, loosened federal oversight of banks with between $50 billion and $250 billion in assets—a category that includes SVB and Signature.
"As officials sought to develop a plan responding to SVB's failure, Chair Powell muzzled regulators from any public mention of the regulatory failures that occurred under his watch."
Moreover, the Fed under Powell's leadership "initiated key regulatory rollbacks," Warren wrote Saturday, echoing criticisms that she and financial industry watchdogs voiced earlier in the week. "And the banks' supervisors—particularly the Federal Reserve Bank of San Francisco, which oversaw SVB—missed or ignored key signals about their impending failure."
It is "critical that your investigation be completely independent and free of influence from the bank executives or regulators that were responsible for action that led to these bank failures," Warren stressed. "I am particularly concerned that you avoid any interference from Fed Chair Jerome Powell, who bears direct responsibility for—and has a long record of failure involving—regulatory and supervisory matters involving these two banks."
"I have already asked Chair Powell to recuse himself from the Fed's internal investigation of this matter, but he has not yet responded to this request," wrote Warren. The progressive lawmaker said "this silence is troubling" in light of recent reporting that "as officials sought to develop a plan responding to SVB's failure, Chair Powell muzzled regulators from any public mention of the regulatory failures that occurred under his watch."
"Bank regulators and Congress must move quickly to close the gaps that allowed these bank failures to happen, and your investigation will provide us important insight as we take steps to do so," added Warren, who has introduced legislation to repeal a vital provision of the Trump-era bank deregulation law enacted five years ago with bipartisan support.
In appearances on three Sunday morning talk shows, Warren doubled down on her demands for an independent investigation into recent bank failures, stronger financial regulations, and punishing those responsible.
After lawmakers from both parties helped Trump fulfill his campaign promise to weaken federal oversight of the banking system, Powell "took a flamethrower to the regulations, saying, 'I'm doing this because Congress let me do it,'" Warren toldABC's "This Week" co-anchor Jonathan Karl. "And what happened was exactly what we should have predicted, and that is the banks, these big, multi-billion-dollar banks, loaded up on risk; they boosted their short-term profits; they gave themselves huge bonuses and big salaries; and they exploded their banks."
"When you explode a bank, you ought to be banned from banking forever."
"When you explode a bank, you ought to be banned from banking forever," said Warren, who acknowledged that criminal charges could be coming. "The Department of Justice has opened an investigation. I think that's appropriate for them to do. We'll see where the facts take them. But we've got to take a close look at this."
Not only did former SVB chief executive officer Greg Becker, who lobbied aggressively for the 2018 bank deregulation law, sell millions of dollars of shares as recently as late last month, but until federal regulators took control of the failed bank on March 10, he was on the board of directors at the San Francisco Fed—the institution responsible for overseeing SVB.
On Saturday, Independent Sen. Bernie Sanders of Vermont announced that he plans to introduce legislation "to end this conflict of interest by banning big bank CEOs from serving on Fed boards."
"We've got to say overall that we can't keep repeating this approach of weakening the regulation over the banks, then stepping in when these giant banks get into trouble," Warren said Sunday, arguing for stronger federal oversight to prevent the need for bailouts.
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Biden Says Top Executives of Failed Banks Should Face Harsher Penalties
The president is "rightfully fighting to hold bank executives accountable for their failures," said Sen. Elizabeth Warren.
Mar 17, 2023
Days after U.S. Sen. Elizabeth Warren expressed outrage over the bonuses that Silicon Valley Bank executives were handing out hours before the bank failed, President Joe Biden on Friday called on Congress to strengthen regulatory powers to hold officials at failed banks accountable.
The president said in a statement that the White House's authority to hold SVB executives directly responsible for the failure is limited, but said Congress can and should pass legislation granting the Federal Deposit Insurance Corporation (FDIC) broader powers to take action against former SVB CEO Greg Becker and other executives.
He called on lawmakers to allow the FDIC to claw back compensation from executives, impose civil penalties, and bar executives from working in the financial services industry if their banks failed "due to mismanagement and excessive risk taking."
"I'm firmly committed to accountability for those responsible for this mess," said Biden. "No one is above the law—and strengthening accountability is an important deterrent to prevent mismanagement in the future. Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing."
SVB and Becker himself raked in significant profits by largely serving wealthy tech companies, and took a risk by holding an "abnormally large ratio of uninsured deposits," as Warren said earlier this week. They also invested a large share of the funds into long-term Treasury bonds whose value plummeted as interest rates rose, causing the bank's clients to withdraw their money only to find SVB did not have sufficient funds on hand.
In addition to giving out bonuses hours before SVB collapsed, Becker sold roughly $3 million worth of shares of the bank in the weeks before the failure.
Currently the FDIC can claw back compensation of executives of the nation's largest banks if they fail and can only impose other penalties if executives act with "recklessness" or "willful or continuing disregard."
Biden called for Congress to allow the regulatory agency to penalize executives for "negligent" conduct as well.
Warren applauded Biden's call, saying the president is "rightfully fighting to hold bank executives accountable for their failures."
"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," said the Massachusetts Democrat. "Congress must step up."
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