Source: United States Senator for Nevada Cortez Masto
Bipartisan Legislation to Claw Back Compensation from Failed Bank Executives Picks Up Steam in the Senate
Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.) announced that U.S. Senators J.D. Vance (R-Ohio), Bob Menendez (D-N.J.), Katie Britt (R-Ala.), Mark Warner (D-Va.), Kevin Cramer (R-N.D.), Chris Van Hollen (D-Md.), Tina Smith (D-Minn.), Raphael Warnock (D-Ga.), and John Fetterman (D-Pa.)—all members of the Senate Banking, Housing, and Urban Affairs Committee—joined her and Senators Elizabeth Warren (D-Mass.), Josh Hawley (R-Mo.), and Mike Braun (R-Ind.) to update and introduce the bipartisan Failed Bank Executives Clawback Act. This bipartisan bill would require federal regulators to claw back up to three years of compensation received by big bank executives, board members, controlling shareholders, and other key decision-makers in the event of a failure or resolution.
“Bank executives shouldn’t be able to cash out and keep multi-million dollar bonuses when their mismanagement causes their institutions to fail,” said Senator Catherine Cortez Masto. “This bipartisan legislation will enable financial regulators to claw that money back and hold these individuals accountable for threatening the stability of Nevada businesses and families.”
The Federal Deposit Insurance Corporation (FDIC) currently has limited ability to claw back executive compensation in the event of a bank failure. The bipartisan Failed Bank Executives Clawback Act, which was originally introduced by Senators Cortez Masto, Warren, Hawley, and Braun in March, would give federal bank regulators the tools they need to hold the executives of big failed banks responsible for the costs that those failures exact on the rest of the banking system and the economy. Specifically, the legislation would:
- Give the FDIC the authority to claw back from large bank executives all or part of the compensation they received over the three-year period preceding their bank’s failure or FDIC resolution.
- Apply any clawbacks to directors, officers, controlling shareholders, and other high-level persons involved in decision-making of banks with $10 billion or more in assets who caused more than a minimal financial loss to, or had a significant adverse effect on, the bank.
- Direct funds clawed back from executives into the FDIC’s Deposit Insurance Fund.
- Extend claw back authorities established by the Dodd-Frank Wall Street Reform and Consumer Protection Act to apply to any bank entered into FDIC receivership, not solely those resolved under the FDIC’s Orderly Liquidation Authority.
As the former top law enforcement official in Nevada, Senator Cortez Masto has been a leading voice in the fight to protect consumers from fraud throughout her career. She sounded the alarm on increasing check fraud scams, which cost consumers more than $800 million last year. She also introduced legislation to protect American consumers who sue corporations for fraud and to protect and support whistleblowers reporting wrongdoing to the Consumer Financial Protection Bureau. Her bipartisan legislation to deter disruptive and potentially harmful phone calls and texts was signed into law in 2020.
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