May 17, 2024

ICYMI: At Hearing, Warren Secures Commitments from Fed, FDIC, OCC to Push Forward on Executive Compensation Limitations, Bank Merger Guidance, and Bank Capital Requirements

“I'm going to hold each of you accountable for finishing your unfinished business. The American people need you to get this done.”

Video of Exchange (YouTube)

Washington, D.C. – At a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, U.S. Senator Elizabeth Warren (D-Mass.) sought commitments from regulators at the Federal Reserve (Fed), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller on Currency (OCC) on the FDIC workplace report and pending regulatory priorities.  

Earlier this month, Cleary Gottlieb Steen & Hamilton released an independent review of the FDIC’s workplace culture, which found that the agency failed to address systemic issues which perpetuated a toxic culture. Senator Warren secured a commitment from Chairman Gruenberg to implement all of the recommendations of the agency’s Action Plan and the independent review. 

Senator Warren also secured a commitment from Vice Chair for Supervision of the Federal Reserve, Michael Barr to work to implement a rule that would reform CEO pay packages and move away from incentivizing excessive risk-taking. Senator Warren secured a third commitment, from Acting Comptroller of the Currency, Michael Hsu, to strengthen the OCC’s merger guidelines to include an evaluation of a proposed merger's impact on competition. 

Senator Warren called out the bank lobby’s opposition to a new, stronger capital requirements on major banks, and secured commitments from all three regulators to finalize a strong rule in the fall. 

Transcript: “Oversight of U.S. Financial Regulators: Accountability and Financial Stability”
Senate Committee on Banking, Housing, and Urban Affairs
May 16, 2024

Senator Elizabeth Warren: Everyone deserves a workplace that’s free of discrimination and harassment. Chairman Gruenberg, the Republicans who have called today for your resignation are engaged in a purely political exercise. They want to replace you with Vice Chairman Travis Hill, the right-hand man to your Republican predecessor who allowed culture problems at the agency to fester. Your resignation would do nothing to improve the toxic culture at the FDIC, but it would give Republicans a veto over bank policy. 

Culture starts at the top. It is your responsibility to fix this. So let me ask, do you commit to implementing all of the recommendations from the Action Plan and the independent review?

Mr. Martin Gruenberg, Chair, Federal Deposit Insurance Corporation: Yes, Senator. 

Senator Warren: We will be watching you to make sure you keep your word on this. So let me turn to the purpose of this hearing. 

2023 was the biggest year for bank collapses in our nation's history. In a span of two months, we saw the second, third, and fourth largest bank failures ever. Each of you has unfinished business needed to strengthen our financial rules and to prevent another crisis. 

First, executive compensation. The CEOs of the banks that failed walked away with millions of dollars each after they ran their banks into the ground. 

The FDIC, under Chair Gruenberg’s leadership, and the OCC, under Acting Comptroller Hsu, have finally revived a Dodd-Frank rule that would reform CEO pay packages so they do not incentivize excessive risk-taking, but the Fed has not joined. 

Vice Chair Barr, will the Fed follow the law and join the FDIC and the OCC’s proposed rulemaking on incentive-based compensation? 

Mr. Michael Barr, Vice Chair for Supervision, Federal Reserve: We are committed to following the law – to having and implementing a rule under Section 956 and we have further work to do. 

Senator Warren: Let's get it done. Your statutory deadline passed 13 years ago. I hope you do not allow Chair Powell to stop you from following the law. 

Second, let's take a look at mergers. Your agencies have allowed the industry to create more too-big-to-fail banks than ever. 

Acting Comptroller Hsu, the OCC’s new proposal on mergers said nothing about how the OCC will evaluate a merger's impact on competition, which kind of misses the point. Will you strengthen your proposal so that it actually addresses competition the way that the FDIC’s proposal does? 

Mr. Michael Hsu, Acting Comptroller, Office of the Comptroller of the Currency: We are working with both the FDIC, the Fed, and the DoJ on exactly that and we continue to work on that – we are committed to that. 

Senator Warren: Good. You have a job to do. I think it is really important we get this done. Vice Chair Barr, the Fed hasn't put out any update on mergers. When can we expect the Fed to follow through on the President's Executive Order to strengthen bank merger guidelines? 

Vice Chair Barr: Senator, we’re working with the FDIC and the OCC and the  Department of Justice on that matter. I don't anticipate us putting out a separate proposal on this. We are working with the other agencies. 

Senator Warren: Tick tock, we have to get this done. Finally, bank capital. These giant banks threaten our entire economy when they collapse, but strong capital requirements allow them to better absorb shocks without needing a bailout from the taxpayers. The Fed released a proposal to strengthen capital requirements on the 37 biggest banks, but the bank lobby has launched an unprecedented campaign to weaken it. 

Vice Chair Barr, are you still committed to finalizing a strong rule this fall? 

Vice Chair Barr: I am committed to doing that. 

Senator Warren: Good. 

Chair Gruenberg, are you committed? 

Chair Gruenberg: Yes, senator. 

Senator Warren: And are you committed, Acting Comptroller Hsu? 

Acting Comptroller Hsu: Yes. 

Senator Warren: Good. I'm going to hold each of you accountable for finishing your unfinished business. The American people need you to get this done. Thank you. 

Thank you, Mr. Chairman.