March 29, 2023

Warren, Hawley, Cortez Masto, Braun Introduce Bipartisan Bill to Claw Back Compensation From Failed Bank Executives

Failed Bank Executives Clawback Act Gives FDIC Authority to Hold Executives of Failed Banks Responsible for Imposing Costs on Banking System, Economy, and Consumers

Text of Bill (PDF) | One-Pager (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Catherine Cortez Masto (D-Nev.), both members of the Senate Banking, Housing, and Urban Affairs Committee, Josh Hawley (R-Mo.), and Mike Braun (R-Ind.) introduced the Failed Bank Executives Clawback Act – bipartisan legislation that would require that, in the event of a bank failure, federal regulators claw back all or part of the compensation received by bank executive 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. Specifically, 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. 

"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."

“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.”

“It’s unacceptable for the executives at Silicon Valley Bank or any major financial institution to pay themselves millions in bonuses while running their banks into the ground,” said Senator Cortez Masto. “This bipartisan legislation will make sure we are holding these individuals accountable for threatening the financial stability of businesses and families in Nevada and across the country.”

Senator Warren is a leading voice on the financial system, holding bank executives accountable for gross mismanagement and advocating for critical regulations to protect consumers, the financial system, and the economy:

  1. On March 22, 2023, Senator Warren and Rick Scott (R-Fla.) introduced bipartisan legislation to require a presidentially-appointed and Senate-confirmed Inspector General to the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
  2. On March 22, 2023, Senators Warren, Tammy Duckworth (D-Ill.), Richard Blumenthal (D-Conn.), Bernie Sanders (I-Vt.), Jack Reed (D-R.I.), Mazie Hirono (D-Hawaii), Ed Markey (D-Mass.), Angus King (I-Maine), Sheldon Whitehouse (D-R.I.), Tina Smith (D-Minn.), Chris Van Hollen (D-Md.), and Brian Schatz (D-Hawaii) sent a letter to the Vice Chair for Supervision of the Federal Reserve Michael Barr, calling on him to exercise the Fed’s authority to apply stronger regulation and supervision to banks with assets totaling $100 to $250 billion.
  3. On March 19, 2023, Senator Warren sent a letter to the Inspectors General at the Department of Treasury, the Federal Deposit Insurance Corporation, and the Fed, urging them to immediately open a thorough, independent investigation of the causes of the bank management and regulatory and supervisory problems that resulted in this month’s failure of Silicon Valley Bank and Signature Bank and deliver preliminary results to Congress and the public within 30 days. 
  4. On March 14, 2023, Senator Warren and Representative Katie Porter (D-Calif.) led dozens of Democratic lawmakers to introduce the Secure Viable Banking Act, legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 following the collapse of SVB and Signature Bank. In 2018, Senator Warren was outspoken about the dangers of passing the Economic Growth, Regulatory Relief, and Consumer Protection Act, which reduced critical oversight and capital requirements for large banks. 
  5. On March 14, 2023, Senator Warren sent a letter to ex-SVB CEO Greg Becker, asking for answers about his and SVB lobbyists’ efforts to roll back Dodd-Frank rules prior to the collapse of the bank.
  6. On March 14, 2023, Senator Warren called on Federal Reserve Chair Jay Powell to recuse himself from the Federal Reserve’s announced internal review of its supervision and regulation of SVB.
  7. On March 13, 2023, Senator Warren published an op-ed in the New York Times calling Congress and federal regulators to strengthen weakened rules to avoid another crisis, intensify bank oversight, reform deposit insurance, and hold SVB executives accountable for any malfeasance or mismanagement that led to its failure.
  8. On March 10, 2023, Senator Warren released a statement following the collapse of SVB.