Back in March, Silicon Valley Bank crashed and burned in a matter of days, making the California-based financial institution’s collapse the second-largest bank failure in U.S. history.

SVB’s crash created a ripple effect that led to the fall of Signature Bank and First Republic Bank, and left the banking world in an extremely fragile state. 

So how can we prevent something like this from happening again?

What You Need To Know

  • The failures of Silicon Valley Bank, Signature Bank and First Republic Bank were the second-, third- and fourth-largest bank failures in U.S. history

  • Rep. Maxine Waters authored three bills to reform and better regulate banking in the U.S.

  • The legislation will increase regulations on bank executives and require more financial institutions to undergo risk tests and assessments

“Inside the Issues” host Alex Cohen sat down with Rep. Maxine Waters, a ranking member of the House Financial Services Committee, to discuss why she is leading the charge on 11 bills aimed at reforming banking in the United States. 

“Basically, my bills are designed to avoid the kind of mismanagement and even lack of supervision that has taken place that allowed these banks to basically fail,” she said. 

Waters’ first wave of legislation in response to banking failures includes three new bills. 

HR 4208, or the Failed Bank Executives Accountability and Consequences Act, would expand bank regulatory authority by claiming compensation, imposing fines and banning future work in the industry for bank executives that contribute to a bank’s failure. 

HR 4209, the Incentivizing Safe and Sound Banking Act, plans to widen bank regulator authority by banning some stock sales of bank executives and issuing a cease-and-desist order to any bank not complying with the law. It would automatically restrict such stock sales by senior executives of large banks if their financial institution receives poor exam ratings.

HR 4210, known as the Closing the Enhanced Prudential Standards Loophole Act, is designed to close a loophole that allowed some large banks to escape Dodd-Frank’s enhanced standards because they did not have a bank holding company. The legislation would ensure these kinds of large banks undergo stress testing, resolution planning and other risk requirements.

Waters explained how it is absolutely crucial that the government gets tougher on bank CEOs. 

“First of all, we’ve got to make sure that we claw back some of their compensation," she said. "The other thing we have to make sure is that we are discovering, perhaps with Silicon Valley Bank, that they may have known that they were getting into trouble and they sold stock that they own. We've got to stop that kind of thing from happening. We've got to find them. And we’ve got to make sure that if we find that they were irresponsible, if they mismanaged, they can never be in the industry again. We keep them from ever being bank CEOs again.” 

Waters hopes her legislative actions will help reduce future bank failures in the U.S. and ensure that crashes similar to the ones that occurred at Silicon Valley Bank, Signature Bank and National Bank never happen again.

The congresswoman said she’s more than willing to advocate for Americans to create better bank regulations, even though it will undoubtedly draw pushback from bank leaders.

“It's all about the money. It's all about the profits. And many people have been hurt based on the way the banks work," she said. "And so no matter what the regulations are, even if you’re trying to prevent people from being taken advantage of, they're gonna be opposed to it. And so you've got to know that and you've got to be prepared to fight them and push back on them and organize around getting them basically backed away from trying to stop every regulation that you're trying to do. So we're gonna keep working very hard to get the regulations.”

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