Source: United States Senator Josh Hawley (R-Mo)
Today U.S. Senator Josh Hawley (R-Mo.), Elizabeth Warren (D-Mass.), Mike Braun (R-Ind.), and Catherine Cortez Masto (D-Nev.), introduced the Failed Bank Executives Clawback Act, bipartisan legislation that would require that, in the event of a bank failures like Silicon Valley Bank, federal regulators claw back all or part of the compensation received by bank executives in the five-year period preceding the failure.
Currently, the Federal Deposit Insurance Corporation’s (FDIC) ability to claw back executive compensation in the event of a bank failure is limited. The Failed Bank Executives Clawback Act would give federal bank regulators the tools they need to hold executives of failed banks responsible for the costs those failures exact on the rest of the banking system and the economy, and require the FDIC to act to prevent the unjust enrichment of bank executives.
“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 Senator Hawley. “This legislation puts the executives’ own profits on the line, and that’s exactly as it should be.”
“The President called on Congress to pass a new law to hold failed bank CEOs accountable and give the financial cops on the beat additional authority to clawback lavish pay and bonuses when executives explode their bank – and this bipartisan bill answers that imperative,” said Senator Warren. “Americans are sick and tired of fat cat bankers paying themselves handsomely while risking other people’s hard earned money. 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.”
Earlier this month, Senator Hawley and Senator Braun introduced the Protecting Consumers from Bailouts Act, which would prevent the FDIC from levying “special assessments” on community banks to pay for bailing out the uninsured depositors of failing banks, protecting customers from new fees and forcing the big banks to face up to their mistakes.
Specifically, the Failed Bank Executives Clawback Act 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.
View the full bill text here.