Sen. Elizabeth Warren called for an insider trading investigation of former Silicon Valley bank CEO Greg Baker following a Senate Banking Committee hearing on Tuesday.
“There is enough said in this hearing today that there should be a full investigation,” Senator Warren told Yahoo Finance Live.
Baker was asked by several senators on Tuesday if he knew Silicon Valley Bank was in trouble when it sold stocks in the weeks leading up to the crash. He said he believed he was not in possession of any material non-public information despite knowing about 30 unresolved supervisory issues.
He noted that he regularly sold the underlying shares of his stock options before they expired through the 10b5-1 plans.
Warren responded to those comments during an interview with Yahoo Finance Live on Tuesday.
“An idea…it really blew up a bank,” Warren said, “and it’s a bank that has a lot of business, a bank that’s been getting all kinds of warnings from regulators that you’ve taken on too much risk, and then you want to claim you used good judgment in running that bank, and then you want to To turn around and say, but you had no knowledge of what was really going on when it came to insider trading terms.”
She added, “The whole point here is how they increase short-term profits, then take the money to themselves personally, and then keep all that money for when the bank goes bust. And that’s the part that Congress has to put a stop to.”
Warren and a bipartisan cadre of senators including Kathryn Cortez Masto (D-Neff), Josh Hawley (R-Mis.), and Mike Brown (R-India) have introduced a bill that would require federal regulators to reclaim all or part of the compensation he receives. Bank executives in the event of bank failure in the five-year period preceding the failure.
The bill would give the FDIC more powers to recover compensation than it has now.
When asked if she thought she could pass the bill in the full Senate on short notice, Warren said she believed she could.
“I do. I have good partners on this,” Warren said. “We have a lot of Democrats who are committed to this, but we also have a good group of Republicans. We didn’t get everyone to sign on the dotted line…but I feel very optimistic that we’re going to have a good group of people. we ask [Senate Committee] President Brown for allowing us to sign this bill… I think he will get good support. I think it will work.”
Warren said she’s also concerned that the country’s largest banks are getting bigger. JPMorgan Chase, the country’s largest bank, recently acquired the bulk of First Republic after that lender failed. Treasury Secretary Janet Yellen also said she expected more bank mergers that regulators would be open to approving.
We need not see that making banks too big to fail is the answer. Warren said. “Now we have to understand that poor regulation has left a lot of these multi-billion dollar banks on shaky foundations. In order to bring them together and create more concentration in the banking industry, this is not a happy solution. This is a bad problem that made it worse.”
One solution, she said, is to reduce incentives for bank executives to take huge risks.
“If they mitigate the risk next time they pay themselves, they blow their banks, they’re going to lose all that money they paid themselves for taking exactly that risk,” she says. “The idea is to make those incentives aligned a little bit better so you don’t blow your bank.”
It also says the Fed needs to increase oversight and regulation of banks and that Congress repeal a 2018 Trump-era law that eased capital requirements for banks to between $100 billion and $250 billion.
“We already have a very high concentration in the banking industry,” she said. “We need to be strict with the banking industry.”
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