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Sen. Elizabeth Warren wants banking to be “boring” again following the failures of Silicon Valley Bank and Signature Bank.
“What I want to do is get banking back where it ought to be, and that is boring,” Warren, D-Mass., said Friday morning on CNBC’s “Squawk on the Street.” “Banking is supposed to be there for putting your money in and you can count on it’s going to be there, and that’s true if you’re a family, that’s true if you’re a small business.”
Warren said the problem started under the Trump administration, when bank CEOs lobbied Congress to weaken regulation for regional and midsized banks. Silicon Valley Bank was among those who lobbied for the changes, Warren pointed out, noting the bank’s profits surged in 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 able to fail practically overnight earlier this month. Financial regulators shuttered the two banks, citing systematic contagion fears, after negative news triggered bank runs. The failed banks disproportionately serviced startup and cryptocurrency companies.
The incident marked the largest U.S. banking failures since the 2008 financial crisis, and the second- and third-biggest bank failures in U.S. history.
In the weeks since the collapse of the banks, Warren has authored or sponsored three new bills related to bank oversight.
The first would reverse a Trump-era bill that weakened oversight of medium-sized banks. The second would create an inspector general position within the Federal Reserve, and the third would prohibit executives at publicly traded companies from selling stock options for three years.
U.S. Senator Elizabeth Warren (D-MA) is interviewed on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 31, 2023.
Andrew Kelly | Reuters
“What we want to do is align the incentives,” Warren said Friday. “I have a bipartisan bill for clawbacks and the whole idea is to say to these CEOs going forward ‘hey if you load this bank up on risk and the bank explodes, you’re going to lose that fancy bonus, you’re going to lose that big salary, you’re going to lose those stock options.'”
Banking should not be an industry that attracts risk-takers, Warren said.
“I really want to say to bank CEOs, if you’re the kind of guy or gal who wants to roll those dice and take big risks, don’t go into banking,” Warren said. “Banking is about steady profits. Banks should absolutely be able to make profits, but when banks load up on risks, they put depositors at risk, they put small businesses at risk, and ultimately as we’ve learned with these million-dollar banks, they put our whole economy at risk.”
Warren chided banking regulators for not doing enough and called on Congress to join her in putting safeguards back into place.
“You’ve got to look at everything that broke here,” Warren said. “We permitted the regulators to take their eye off the ball. Banking is a regulated industry for a reason because of its impact on the rest of the economy. Just as Joe Biden said yesterday – they need to start tightening those regulations down right now.”
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