Yahoo Finance has reported that Elizabeth Warren (Senator) called for an insider trading investigation into ex-SVB CEO Greg Baker. This was after a Senate Banking Committee hearing on Tuesday.
Senator Warren told Yahoo Finance Live that the day’s hearing speaks volumes that a full investigation must be conducted. On Tuesday, many senators questioned ex-SVB CEO Baker whether he knew SVB was in trouble. This was the time when he sold the stock weeks before the collapse. He said he believed he had no material, non-public information, despite knowing about 30 pending supervisory matters. He said he regularly used to sell the shares underlying his stock options before the expiration through a 10b5-1 plan.
Senator Elizabeth Warren told during the Yahoo Finance Live interview that the idea that one person has actually blown up a bank, the bank that had good business, the bank that was getting several warnings from regulators that they were taking too much risk. He claimed that he used good judgment to run that bank. However, he then turned around and said that he had no knowledge of what was actually going on in SVB in terms of insider trading.
A bipartisan group of senators, including Warren and Catherine Cortez Masto, Josh Hawley, and Mike Braun, has introduced a bill that would require federal regulators to all or all bank executives. Part of the compensation received if a bank fails during the five years preceding the failure. The bill would give the FDIC more authority to seek compensation than it has now. When he wondered if she could pass the bill in short order in the full Senate, Warren said she thought she could.
Senator Elizabeth Warren said that several of the Democrats are committed to this. And they also have a good group of Republicans. She is feeling optimistic that they will have a good group. They are asking the Senate Committee, Chairman Brown, to mark this bill for them; she thinks it will get good support. She thinks it is going to make it through.
However, Warren said she worries that the nation’s largest banks are only growing. JPMorgan Chase, the nation’s largest bank, recently acquired a majority stake in First Republic after that lender failed. Treasury Secretary Janet Yellen also said she expects more bank mergers to be open to regulatory approval.
Warren said their solution is not to make banks too big to fail. It does not. They must realize that weak regulation has put these multi-billion dollar banks on shaky ground. To bring them together and create more concentration in the banking industry is not a happy solution. It made a bad problem worse. One solution, she said, is to reduce incentives for bank CEOs to take on excess risk.
She said that if they take the next risk, pay themselves off, and blow up their banks, they will lose all the money they paid themselves to take that risk. The idea is to align those incentives better to not blow your bank. She also said the Federal Reserve needed to increase oversight and regulation of banks. She further said there is already too much concentration in the banking industry. So, they have to be tough on this banking industry.