Hawley, Warren Lead Bipartisan Bill to Hold Bank Executives Responsible for Bank Failures
Sens. Josh Hawley (R-MO) and Elizabeth Warren (D-MA) are leading a bipartisan group of senators in introducing legislation that would allow federal regulators to take back “all or part of” the compensation bank executives received in the five years preceding the event of another bank failure.
In the wake of the Silicon Valley Bank (SVB) collapse, the bipartisan legislation, Failed Bank Executives Clawback Act, would ultimately require federal regulators — in the event of bank failures, to take back the compensation bank executives received in the five years preceding the failure.
While the Federal Deposit Insurance Corporation’s (FDIC) ability to “claw back” compensation from bank executives in case of a bank failure is limited, bipartisan legislation would give regulators the tools they need to hold executives of failed banks responsible. The legislation would:
-Require the FDIC to claw back from bank executives all or part of the compensation they have received over the five-year period preceding a bank’s insolvency or FDIC-resolution as is necessary to prevent unjust enrichment.
-Extend claw back authorities established by Section 204(a)(3) of the Dodd-Frank Wall Street Reform and Consumer Protection Act to apply to any bank entered into FDIC receivership, not only those resolved under the FDIC’s Orderly Liquidation Authority.
-Ensure that, should an insured depository institution affiliated with a bank holding company fail, investors in that holding company should bear the losses of the insured depository institution.
“Bank executives who make risky investments with customers’ money shouldn’t be permitted to profit in the good times, and then avoid financial consequences when things go south,” said Hawley in a statement. “This legislation puts the executives’ own profits on the line, and that’s exactly as it should be.”
Warren, explaining that President Joe Biden wanted Congress to pass legislation to hold bank CEOs responsible, also noted that this gives “the financial cops … additional authority to clawback lavish pay and bonuses when executives explode their bank.”
“Americans are sick and tired of fat cat bankers paying themselves handsomely while risking other people’s hard-earned money,” Warren added. “It’s time for Congress to step up and strengthen the law so bank executives bear the cost of failure, not line their pockets and walk away scot-free.”
In addition to Hawley and Warren, the legislation is already supported by Sen. Mike Braun (R-IN) and Catherine Cortez Masto (D-NV).