Biden Asks Congress for New Tools to Deal with Failed Bank Executives
WASHINGTON. On Friday, President Biden asked Congress to pass legislation giving financial regulators sweeping new powers to seize ill-gotten gains from bankrupt bankers and impose penalties for failures.
The proposal, in response to last week’s federal bailout of depositors at Silicon Valley Bank and Signature Bank, would also seek to bar bankrupt bank executives from other positions in the financial industry.
The measures contained in Mr. Biden’s plan will build on the existing regulatory powers of the Federal Deposit Insurance Corporation. Administration officials were still weighing on Friday whether to ask Congress for further changes to financial regulation in the coming days.
“Increasing accountability is an important deterrent to future mismanagement,” Mr. Biden said in a statement released by the White House.
“When banks fail due to mismanagement and excessive risk, it should be easier for regulators to seek compensation from executives, impose civil sanctions and again ban executives from the banking industry,” he said, adding that Congress should pass legislation to make this possible.
“The law limits the administration’s powers to hold executives accountable,” he said.
One clause of the proposal would expand the FDIC’s ability to recover bankrupt bank executives in response to reports that a Silicon Valley Bank chief executive sold $3 million in bank stock shortly before federal regulators took him away. a week ago. Regulators’ current powers to recover funds are limited to the largest banks; Mr. Biden will expand them to include banks the size of Signature and Silicon Valley Bank.
Unlike top Silicon Valley Bank officials, a senior Signature Bank chief executive and one of his board members bought the firm’s shares last Friday when it was in turmoil, regulatory reports show. Signature Chairman Scott Shea bought 5,000 shares of Signature and one of its directors, Michael Pappagallo, bought 1,500 shares.
The President is also asking Congress to lower the legal barrier that the FDIC must remove to bar the bankrupt’s bank manager from working anywhere else in the financial industry. This option currently only applies to executives who “deliberately or persistently neglect the safety and soundness” of their institutions. It also seeks to expand the agency’s ability to impose fines on executives whose actions contribute to the failure of their banks.
The proposals face an uncertain future in Congress. Republicans control the House of Representatives and oppose Mr. Biden’s other attempts to tighten federal rules. A 2018 law to repeal certain banking regulations that were approved in the wake of the 2008 financial crisis was passed by the House and Senate with bipartisan support.
Montana Republican Sen. Steve Danes chided Mr. Biden for focusing on regulation and indicated that he would not support any move to introduce new rules in the banking sector.
“What we don’t need is more onerous rules for well-managed and sound Montana banks that haven’t failed,” Mr. Danes said in a statement Friday night.
Democrats have been much more vocal in their support for the call for new rules. Senate Banking Committee Chairman Sherrod Brown of Ohio said in a statement emailed to reporters that regulators need “stricter rules to curb risky behavior and expose incompetence.”
He added that in addition to leaders who failed in their duties, there should be a way to hold “the regulators who are tasked with watching them” accountable.“.
In a letter to the chairs of the Securities and Exchange Commission, the FDIC and the Fed, Representative Maxine Waters, a Democrat of California, asked regulators to use the “maximum extent” of their current powers to detain senior executives and executives from both banks. are accountable to the directors of the board of directors.
She added that the Dodd-Frank Act, enacted in the wake of the 2008 financial crisis, gave agencies more power than they have so far used to tie financial industry executive compensation to successful risk management strategies.
“While I am moving quickly to develop legislation on foreclosures and other collapse-related matters, it is imperative that your agencies act now to investigate these bank failures and use the available enforcement tools you have available to engage executives. to full responsibility for any illegal activity. she wrote.
Stock markets falter as investors see fallout from Credit Suisse bailout
The takeover of Credit Suisse by UBS, Switzerland’s largest bank, should have assuaged growing market concerns about the state of the financial sector. Those worries persisted on Monday as bank stocks tumbled and markets around the world fluctuated between profit and loss as investors cautiously assessed the fallout from a hastily orchestrated deal on Sunday by Swiss regulators to bail out Credit Suisse from the brink of disorderly bankruptcy.
Markets in Asia fell and European equities fell at the open before making up for their losses. Futures in the United States have been volatile, fluctuating from losses to gains. Volatile trading followed relatively sharp losses on Friday, meaning bank bailouts over the weekend, which in addition to the takeover of Credit Suisse included a deal between major central banks to make dollar funding more accessible and the acquisition of parts collapsed Signature Bank in New York – the nerves did not calm down.
European markets opened lower, with banks in the spotlight. UBS shares fell about 5 percent in Zurich as the risks and complexity of a Credit Suisse takeover gave investors pause. The index, which tracks Europe’s largest banks, fell about 2 percent amid a revaluation of the value of banks as a whole.
In Asia, markets closed with losses, with Tokyo’s Nikkei 225 down more than 1% and Hong Kong’s Hang Seng down more than 2%.
Futures for S&P 500 stocks, which give investors the opportunity to bet on the index before the start of trading, remained virtually unchanged after losses were recorded in early trading. On Friday, the S&P 500 fell 1.1%, the sharpest drop in a week.
First Republic Bank, which was the target of a bailout by larger rivals that poured billions into the San Francisco facility, fell more than 30 percent on Friday, and pre-market trading points to another steep decline when markets open on Monday. S&P Global on Sunday downgraded First Republic’s credit rating for the second time in less than a week.
Uncertainty continued to weigh on oil prices, reflecting concerns that banking problems could slow economic growth. Brent crude, the international benchmark, fell to nearly $70 a gallon, its lowest level since late 2021, before climbing higher. West Texas Intermediate crude fell briefly to $64.12 a gallon, also the lowest in more than a year.
On Sunday, the Swiss Financial Market Supervisory Authority announced the acquisition of UBS Credit Suisse for $3.2 billion, a significant discount to the bank’s market value. The country’s central bank, the Swiss National Bank, will lend up to CHF 100 billion ($108 billion) to UBS to help it complete the takeover.
The deal put an end to long-standing doubts about the health of Credit Suisse, which were fueled by the recent collapse of the California-based Silicon Valley Bank.
Shortly after the UBS acquisition of Credit Suisse was announced, the Federal Reserve and five other central banks, including the Swiss National Bank, announced coordinated actions to keep dollars readily available for short-term lending within the global financial system.
Separate Sunday night Federal Deposit Insurance Corporation said it had entered into an agreement to sell 40 former branches of Signature Bank, which were turned over to US regulators on March 12, to the New York Community Bancorp.
The acquisition of UBS Credit Suisse through the mediation of the Swiss authorities came after another weekend of frenzied activity by banking regulators in the US and Europe.
“The worst has been avoided, but with the more cold-blooded prevailing, the question arises whether UBS got Credit Suisse very cheaply, or whether the banking system as a whole is grossly overvalued,” said Peter Cheer, global markets strategist at Academy Securities.
Investors said they also expect Sunday’s Credit Suisse deal to cause turmoil in debt markets as it wiped out the bank’s bondholder group. Investors who own shares in a company are usually the last to be paid out in the event of a liquidation of the company. But in this case, Credit Suisse shareholders received one share of UBS for every 22.48 shares they owned, according to the terms of the deal.
Credit Suisse’s depreciated bonds were a special form of risky bank debt known as AT1 bonds, designed to cover losses during times of stress. On Monday, banking regulators in the European Union, of which Switzerland is not a member, released a statement confirming that in their jurisdiction, shareholders incur losses in banks before bondholders.
The London-based fund, which tracks AT1 bond yields, fell more than 10 percent in trading on Monday.
The crisis in the banking sector continues ahead of an important Fed meeting on Wednesday. Many economists expect Fed policymakers to raise rates by a quarter of a point, but market pricing suggests that traders are evenly divided over whether the central bank will raise interest rates as it continues to tighten the screws in an economy already showing signs of backtracking from a year-long crisis. speed increases rapidly, or leave it unchanged. This is a remarkable turnaround from just a few weeks ago when traders were appreciating a half-point rate hike by the Fed.
“Economists often underestimate the perversity of market movements,” Berenberg Bank’s Holger Schmieding wrote in a research note on Monday. “Because fear breeds fear, markets can fall harder and longer than fundamentals can justify.”
Jason Karajan another Kevin Granville made a report.
On post-Brexit Britain and the future of conservatism
The message of the end of austerity has certainly reached the Center for Policy Studies (CPS). On June 10, the CPS launched Post-Brexit Britain, a new collection of essays edited by George Freeman, written largely by his fellow 2010 MP recruiters. CPS rented the largest room at 1 George Street, a huge hall adorned with gilding and portraits of bearded Victorians, and treated guests not only to decent sandwiches, but also to champagne and scones with cream and strawberries. Several leadership candidates such as Sajid Javid and Dominic Raab made speeches. Penny Mordaunt cackled like a mother hen (I wonder if her decision not to run in this leadership election could prove that she is the most sensitive student in the class of 2010). Mr. Freeman loudly declared that his book gives the party “a new conservatism for a new generation” and the intellectual tools it needs to fight the resurgent far left.
His enthusiasm is infectious. But he asks too much. His book is more like a priest’s egg than a Viagra pill capable of resurrecting a flagging conservative philosophy, not to mention a hand grenade aimed at the headquarters of Corbinism. In his preface, Mr. Freeman rightly argues that the Conservative Party is facing a crisis of the same magnitude as it faced in 1848, 1901, and 1945. to the fact that Thatcherism offers no obvious solution to pressing problems like overcrowded suburban trains. Various participants are also addressing issues that conservatives have shied away from, such as the importance of devolution.
However, much of the book demonstrates how difficult it is for a party to get intellectual refueling while still in government. Matt Hancock’s head of health secretary is startlingly bad: predictable praise for technological innovation, devoid of interesting examples, and written in a string of clichés. (One well-read Tory quipped that the fact that the chapter was so bad proved that it was written by its supposed author and not by an assistant.) The book as a whole is noticeably free from detailed discussion of such topics as social assistance. (the issue that killed the party in the last election) or corporate reform. The Conservative Party as a whole will have to do more than that if it is to make a strong case against the resurgent far-left Labor Party.
Great cover pack this week New statesman to “Closing the Conservative Mind” (with the promise of more!). Robert Saunders argues that the Conservative Party has always been a party of ideas much more than it wants to pretend: its resurgence in the 1940s and especially in the 1980s was due to its willingness to embrace radical new thinking about the basic building blocks of society. . But now, instead of ideas, the party has nothing but the ideology of kamikaze (“Brexit or crash”) and empty faith in markets and technologies (see above). Theresa May was an idea-free zone (compare her to Lord Salisbury or Arthur Balfour). Boris Johnson, her almost certain successor, is no longer an intellectual, despite his ability to quote Latin tags. There are some interesting thinkers in the party, like Jesse Norman and Rory Stewart (both sadly old Etonians), but it’s much more the party of Gavin Williamson, a former fireplace salesman who boasts of a lack of interest in political theory. than a party of these eccentric “reading men”.
The job is well done. But can’t this apply equally well to liberal thinking or Labor thinking – or perhaps to Western thinking in general? The Blair-Cameron-Clinton liberalism that dominated politics in the 1990s and early 2000s has run its course. This liberalism was based on a simple formula: just add social liberalism to economic liberalism and you have the ingredients of a good society. More astute observers of politics have always known that this is too good to be true: Daniel Bell, in his book The Cultural Contradictions of Capitalism, demonstrated that social liberalism can destroy the moral capital that forms the basis of economic liberalism.
But over the past few years, we have learned that Mr. Bell rather underestimated the contradictions of his position. The biggest problems that most capitalist societies currently face stem from the extremes of both forms of liberalism. The excesses of economic liberalism have given us giant corporations that stifle competition and, in the case of Internet companies, develop a sinister form of surveillance capitalism. The excesses of social liberalism have given us various forms of social breakdown that can be seen in the most extreme manifestations in America: a record number of broken families; an epidemic of drugs, especially opioids; millions of men who have dropped out of the labor force and lead a life of petty crime and binge watching TV. It is unfair to blame only social liberalism for these problems. They have a lot to do with the destruction of manufacturing jobs and the legacy of slavery. But social liberalism clearly has something to do with it: loosening inhibitions on self-destructive behavior leads people to make decisions that, in the long run, may leave them either addicted to drugs or lacking the skills or self-discipline to become productive members of society. A prime example of the collapse of dual liberalism is San Francisco, where hundreds of homeless drug addicts live on the streets, and tech billionaires and would-be billionaires must dodge piles of human feces as they go to the latest sushi craze. compound.
And then there is Labor thinking. The Labor Party responded to the collapse of neoliberalism not by trying to create a new progressive synthesis, but by re-embracing one of the bloodiest ideologies of the 20th century. Jeremy Corbyn, the man who makes Theresa May look like an intellectual, has surrounded himself with hardline Marxists like Andrew Murray and Seamus Milne. pages of David Kot’s book “Companion Travelers”. John McDonnell, the Shadow Chancellor, is undoubtedly one of the smartest men in Parliament, inclined to reinforce his Trotskyism with ideas borrowed from other traditions, especially the cooperative one, and able to use new ideas (such as taking 10% of the shares into state ownership) for old purposes. But the fact that he is such an energetic walker should not hide from us the fact that he is going in the wrong direction and is trying to bring his country off the cliff. As long as this gang is in power, Labor’s mind is not so much closed as dead.
V New statesman the cover more or less coincides with the publication of George Will’s new great work, a 640-page study of conservatism called “Conservative Sensibility” (Mr. Will says he chose “sensibility” over “reason” because “reason” was already occupied by Russell Kirk). The “Conservative Sensibility” – a stream of philosophical reflection on the great American and European conservative traditions – is proof that at least one conservative mind is still open. Mr. Will still surpasses all his rivals in his ability to combine high thinking with a shrewd ability to understand everyday American politics. The reception of the book is also evidence that it was not only conservative minds that were closed: when, as a Princeton graduate, he recently approached a group of Princeton students, these privileged children decided to turn their backs on him for various unknown intellectual sins. But Mr. Will’s book also implicitly supports the thesis of closing the conservative mind: it’s hard to imagine any of today’s embittered young conservatives of the “movement” who would have lasted fifty years in journalism like Mr. Will, and still have enough strength. to, let’s say, release a big book at 78 years old.
New York Community Bank to buy bank with failed signature
NEW YORK (AP) — New York Community Bank has agreed to buy a significant portion of failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corporation said. said at the end of Sunday.
Starting Monday, 40 branches of Signature Bank will become Flagstar Bank. Flagstar is one of the subsidiaries of New York Community Bank. The deal will include a $38.4 billion purchase of Signature Bank’s assets, just over a third of Signature’s total when the bank went bust a week ago.
The FDIC said the $60 billion in Signature Bank loans will remain in receivership and are expected to be sold on time.
The signature bank was second bank failed in this banking crisis, about 48 hours after the collapse of Silicon Valley Bank. New York-based Signature has been a major commercial lender in the tri-state region but has taken to cryptocurrencies as a potential growth business in recent years.
Since the bankruptcy of Silicon Valley Bank, savers have become concerned about the health of Signature Bank due to its large number of uninsured deposits, as well as its exposure to cryptocurrencies and other technology-focused lending. By the time it was shut down by regulators, Signature was the third-largest bank failure in U.S. history.
The FDIC says it expects Signature Bank’s failure to cost the deposit insurance fund $2.5 billion, but that figure could change as the regulator sells off assets. V deposit insurance fund paid by bank contributions, and taxpayers do not incur direct costs in the event of a bank failure.
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