Senator Elizabeth Warren wants banking to be boring again

After Silicon Valley Bank and Signature Bank failed, Senator Elizabeth Warren expressed her desire that banking should return to being "boring" again.

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"There is only one thing I want to do, and that is to get banking back where it belongs, and that is boring," Warren, D-Mass., told Trade Algo on Friday morning. "There is a whole concept of banking that is supposed to be there for you to deposit your money and you can trust that it's going to be there for you, and that's true if you are a family, that's true if you're a small business."

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As Warren pointed out, the problem started during the era of the Trump administration, when CEOs of regional and mid-sized banks lobbied Congress to weaken the regulation that governs them. The Silicon Valley Bank was among those who lobbied the government for the changes, Warren pointed out, noting that the bank's profits soared over the years when regulations were loosened, which led to the changes.

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During a hearing this week, Warren, a long-time critic of the financial industry, pressed the nation's top banking regulators on the reasons why SVB and Signature were able to go under virtually overnight earlier this month. In response to negative news triggering bank runs, financial regulators closed the two banks citing fears of systemic contagion. Startups and cryptocurrency companies disproportionately benefited from the services provided by the failed banks.

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There was a notable increase in U.S. bank failures since the financial crisis of 2008, and it was the second and third-largest bank failure in U.S. history during this period of time.

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There have been a number of new bills introduced by Warren and his colleagues since the collapse of the banks in recent weeks.

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In the first case, a bill from the Trump era would be reversed, which weakens oversight of medium-sized banks. In addition, the second measure would create a position of Inspector General within the Federal Reserve, and the third measure would disallow executives at publicly traded companies to sell stock options for a period of three years.

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"The goal is to align incentives between the private sector and government," Warren said on Friday. "There is a bipartisan bill we are developing on clawbacks and the whole point is to say to these CEOs that if you load this bank up with risk and it goes bust then you are going to lose the fancy bonus, you are going to lose the big salary, you are going to lose the stock options they hold."

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Warren believes that the banking sector should not be seen as an industry that attracts risk-takers.

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"I really want to say to the heads of banks out there, that if you're the type of person that likes to roll the dice and take big risks, then you shouldn't go into banking," Warren said. "Banking is all about making steady profits. Banks must make profits, but when they load up on risks, they put depositors at risk, they put small businesses at risk, and ultimately, as we have learned with these billion-dollar banks, they put our whole economy at risk."

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The Senator chided banking regulators for not doing enough to protect the consumer and urged Congress to come to her aid in restoring safeguards to the banking industry.

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"The first thing you need to do is look at everything that went wrong here," Warren said. "The regulators were permitted to take their eye off the ball because we allowed them to do so. There is a reason why banking is a regulated industry because of its impact on the rest of the economy. Exactly like Joe Biden stated yesterday, it is imperative that they tighten up those regulations as soon as possible."