Sen. Elizabeth Warren wants banking to be “boring” again following the failures of Silicon Valley Bank and Signature Bank.
“What I need to do is get banking back where it must be, and that’s boring,” Warren, D-Mass., said on CNBC’s “Squawk on the Street” Friday morning. “Banking is alleged to be there for putting your money in and you possibly can count on it may be there, and that is true in the event you’re a family, that is true in the event you’re a small business.”
Warren said the issue began under the Trump administration, when bank CEOs lobbied Congress to weaken regulation for regional and mid-sized banks. Silicon Valley Bank was amongst those that lobbied for the changes, Warren identified, noting the bank’s profits surged within the years regulations were loosened.
During a hearing this week, Warren, a longtime critic of the financial industry, pressed the nation’s top banking regulators on how SVB and Signature were in a position to fail practically overnight earlier this month. Financial regulators shuttered the 2 banks, citing systematic contagion fears, after negative news triggered bank runs. The failed banks disproportionately serviced startup and cryptocurrency corporations.
The incident marked the most important U.S. banking failures because the 2008 financial crisis, and the second- and third-biggest bank failures in U.S. history.
Within the weeks because the collapse of the banks, Warren has authored or sponsored three recent bills related to bank oversight.
The primary would reverse a Trump-era bill that weakened oversight of medium-sized banks. The second would create an Inspector General position inside the Federal Reserve, and the third would prohibit executives at publicly traded corporations from selling stock options for 3 years.
“What we wish to do is align the incentives,” Warren said Friday. “I actually have a bipartisan bill for claw backs and the entire idea is to say to those CEOs going forward ‘hey in the event you load this bank up on risk and the bank explodes, you are going to lose that fancy bonus, you are going to lose that big salary, you are going to lose those stock options.'”
Banking shouldn’t be an industry that draws risk-takers, Warren said.
“I really need to say to bank CEOs, in the event you’re the sort of guy or gal who desires to roll those dice and take big risks, don’t go into banking,” Warren said. “Banking is about regular profits. Banks should absolutely have the opportunity to make profits, but when banks load up on risks, they put depositors in danger, they put small businesses in danger, and ultimately as we have learned with these million-dollar banks, they put our whole economy in danger.”
Warren chided banking regulators for not doing enough and called on Congress to hitch her in putting safeguards back into place.
“You have to have a look at all the things that broke here,” Warren said. “We permitted the regulators to take their eye off the ball. Banking is a regulated industry for a reason due to its impact on the remaining of the economy. Just as Joe Biden said yesterday – they need to begin tightening those regulations down without delay.”
