The shadow of the 2008 financial crisis is very long and these days it has still deepened due to the fall of two banks and the emergency rescue of another.
There is an echo. Many voices fear a sequel to that situation, with citizens paying for the mess and the bank managers who caused it taking millions in rewards for ideas as brilliant as subprime, the so-called toxic mortgages.
President Joe Biden, who lived through that tide of evictions as vice president, takes this very seriously.
In his appearance to the nation on Monday, after the takeover of Silicon Valley Bank (SVB) and Signature, he said that not a penny of taxpayers would be used to save those entities and warned that the perpetrators of this other disaster would not they would go rositas.
His threat was reinforced this Friday when he sent a petition to Congress that allows him to have more powers to bill bad bank managers.
“Congress must do more to hold executives to account,” he said in his urgent petition. “No one is above the law,” she recalled.
“When banks fail due to mismanagement and excessive risk-taking, it should be easier for regulators to recover executive compensation, impose civil penalties, and bar executives from ever working in the banking business again,” he stressed.
So it required the expansion of the authority of the Federal Deposit Insurance Corporation (FDIC) to undertake that punishment and even recover “the proceeds from the sale of shares of executives of failed banks such as Silicon Valley Bank and Signature.”
He recalled in his note that SVB managers sold shares worth more than 3 million dollars in the days prior to the intervention. The FDIC currently has very limited powers to recover principal from compensation or sales or to impose penalties.
Concerns about the banking system surfaced again this Friday on the New York Stock Exchange. The Dow Jones entered negative territory again. The euphoria on Thursday over the announcement that the country’s eleven largest banks deposited $30 billion to bail out First Republic Bank, the main victim of the crisis, was short-lived.
Investors reversed their position, after the rise of 10% in the price of the First Republic. This Friday its shares fell around 30% of their value.
