[ [link removed] ]Adam Schiff for Senate




Hey John —

Last week, a very important California bank went bust, threatening the
paychecks of thousands of California workers who were not even aware that
their payroll was being handled by the bank. The failed financial
institution was a vital part of the entrepreneurial ecosystem in the tech
sector, helping to fund a host of start-ups that fueled the state’s robust
economy. That bank was, of course, the Silicon Valley Bank (SVB), and its
collapse sent shockwaves through the financial system.

Those shockwaves continue to rattle markets across the country and also
helped bring down yet another institution, Signature Bank.

How we got here is the result of Congressional malfeasance, poor
regulatory oversight, and terrible bank practices.

First Congress. After the last financial meltdown, Congress passed
regulatory reform which strengthened oversight of banks that were “too
large to fail,” and which included capital requirements, stress testing of
institutions, and other reforms to ensure the government would never again
have to bail out large financial institutions.

A decade later, during the Trump Administration, Congress loosened
regulation of some of these banks, especially banks like SVB. I opposed
this partial repeal of Dodd-Frank protections, but it passed nonetheless,
with overwhelming Republican support, and with the support of a sizable
number of Democrats as well.

As a result, when SVB executives decided to maximize their short-term
profits by investing in a lot of long-term, fixed-rate instruments,
regulators were not on top of the risks this posed at a time of rapid
interest rate hikes. Regulators also paid insufficient attention to the
fact that a huge percentage of depositors had amounts over $250k in their
accounts and therefore were not fully insured against a run on the bank.

This combination of poor oversight and greedy management of the bank
proved catastrophic.

Over the last few days I have been in meetings with FDIC and Treasury
officials, along with many of my colleagues in the California delegation —
first trying to understand how to protect innocent workers, and then
brainstorming on how to protect our economy in the future from other such
failures.

Over the weekend, I started drafting a bill to respond, in particular to
bank executives who traded stock and received bonuses in the run-up to the
bank’s failure. And just hours ago, Senator Richard Blumenthal and I
introduced a big new bill to claw back all profits from stock sales made
by bank executives in the weeks before a bank collapse and to take back
any bonuses they received. We must eliminate the incentive for bank
executives to put their own compensation ahead of the interests of their
depositors and the country. Clawing back their ill-gotten gains is the
best way to do so.

[ [link removed] ]Can you sign on today as a citizen co-sponsor of the Deliver Executive
Profits on Seized Institutions to Taxpayers (DEPOSIT) Act?

[ [link removed] ]ADD YOUR NAME

[ [link removed] ][IMG]

In the lead-up to the bank’s failure, its CEO Greg Becker sold a reported
$3.6 million in SVB stock, profiting off the demise of the very bank he
managed. Another executive sold $575,000 worth of stock the same day. My
bill would return this money to the FDIC insurance fund to pay back
depositors and ensure paychecks are delivered.

Second, we need to repeal S. 2155, legislation pushed by Big Banks to
lessen regulations put in place by Dodd-Frank. I voted against S. 2155
back in 2018, which raised the asset limit at which a bank was subject to
regular stress testing up to $250 billion. That in turn exempted a lot of
medium-sized and regional banks. This needs to be repealed.

Third, the Securities and Exchange Commission and potentially the
Department of Justice need to investigate all of this mess. The timing of
the stock sales and bonus payments to executives are suspect — at best.

Finally, we need to consider other systemic reforms to ensure that this
doesn’t happen again and that workers whose companies rely on banks for
their paychecks or their retirement planning aren’t put in the crosshairs
by bad bank decisions.

[ [link removed] ]I’ll have more to share soon, but in the meantime, I hope you’ll
consider adding your name as a citizen co-sponsor to my bill — the DEPOSIT
Act — to take back bank executives’ stock sales and bonuses in the wake of
these collapses.

[ [link removed] ]ADD YOUR NAME

Thanks for reading this email, and for helping to protect consumers and
the economy from another such trauma to our system.

— Adam

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