June 01, 2023

Warren, Vance, Bipartisan Group of Senators Renew Push for Legislation to Claw Back Big Failed Bank Executive Pay

New Senate Banking Committee Members Joining Senators Warren, Hawley, Cortez Masto, and Braun Proposing Updated Legislation

One Pager (PDF) | Bill Text (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), 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 Senators Catherine Cortez Masto (D-Nev.), Josh Hawley (R-Mo.), and Mike Braun (R-Ind.), to update their original legislation and introduce the Failed Bank Executives Clawback Act – bipartisan legislation that 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.

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 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: 

  • Require the FDIC 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 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 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 solely those resolved under the FDIC’s Orderly Liquidation Authority. 

“Nearly three months after the collapse of Silicon Valley Bank, a bipartisan group of Senators is demonstrating a serious commitment to pass legislation requiring financial regulators to claw back pay from executives when they implode their bank,” said Senator Elizabeth Warren. “Congress must answer the President’s call for stronger laws to hold failed bank executives accountable, and I’m determined to work with lawmakers on both sides of the aisle in the Senate Banking, Housing, and Urban Affairs Committee to deliver change.”

“The executives responsible for running their banks into the ground are sitting on millions of dollars in compensation and bonuses. Meanwhile, the American people are bearing the financial burden for their excessive risk taking and gross mismanagement,” said Senator J.D. Vance. “This legislation would right that wrong and ensure that failed bank executives are held accountable for the collapse of their institutions – not the American taxpayer.”

“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.”

“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 Josh Hawley. “This legislation puts the executives’ own profits on the line, and that’s exactly as it should be.”

“If the federal government is going to step in to cover bank deposits well beyond the $250,000 FDIC limit, bank executives need an extra incentive to manage risk,” said Senator Mike Braun. “This bill to claw back bank executive compensation when the FDIC bails out a bank is necessary.”

“When banks fail, executives should pay the price – not taxpayers. I’m proud to be joining this bipartisan effort to require federal regulators to claw back the compensation of executives that run their banks into the ground,” said Senator Bob Menendez. “Congress needs to do everything in its power to deter reckless behavior that harms hard-working families and the banking system.”

“Executives of failed banks shouldn’t profit from their mismanagement,” said Senator Mark Warner. “This bipartisan legislation would allow regulators to hold managers financially accountable for running a bank into the ground.”

“Top bank executives should not be able to profit from their own malfeasance while leaving depositors at risk and public agencies on the hook to clean up their mess,” said Senator Chris Van Hollen. “The FDIC should have the full authority to claw back these ill-gotten gains.”

“Bank executives who risk the financial wellbeing of their customers and of our economy must be held accountable,” said Senator Tina Smith. “Yet too often, their irresponsible behavior hurts others while they avoid any real consequences. This bipartisan legislation would  ensure real penalties for big bank executives when their risky decisions lead to collapse or failure, adding a layer of protection and accountability to our financial system.”

“When bankers make risky bets that threaten our entire economy, they should not get to cash in. They should be held accountable,” said Senator Reverend Raphael Warnock.

“Gross mismanagement by bank executives caused three of the largest bank failures in U.S. history,” said Senator Kevin Cramer. “When this type of blatant negligence occurs, executives of those failed banks should be held accountable for creating instability across the banking sector and leaving taxpayers to foot the bill. This legislation is a good step toward ensuring bank executives engaged in brazen mismanagement are held responsible.”

“When executives drive financial institutions into failure with reckless business practices, they shouldn’t be allowed to use their golden parachutes to escape responsibility while their customers, their employees, and hardworking American families are left footing the bill for the failure of their bank,” said Senator Katie Britt. “This commonsense legislation will dissuade risky bank mismanagement and ensure that bad actors are held accountable.”

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:

  • On May 16, 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, U.S. Senator Elizabeth Warren (D-Mass.) blasted the former CEOs of Silicon Valley Bank (SVB) and Signature Bank (Signature) for lobbying Congress to weaken banking regulations, loading up their banks with risk, ignoring regulators’ warnings, and crashing their banks – all while keeping their multi-million dollar paychecks.
  • On May 4, 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, U.S. Senator Elizabeth Warren (D-Mass.) highlighted the importance of passing strong legislation to provide the Federal Deposit Insurance Corporation (FDIC) with the necessary authority to claw back executive pay whenever banks collapse, regardless of the specific process the FDIC uses to pick up the pieces.
  • On May 4, 2023, Senator Warren sent a letter to First Republic Bank’s former CEO Michael J. Roffler, inquiring about his and First Republican executives’ mismanagement of the bank, their lobbying for weaker rules, and their compensation and stock sales.
  • 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.
  • 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.
  • 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. 
  • 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. 
  • 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.
  • 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.
  • 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.
  • On March 10, 2023, Senator Warren released a statement following the collapse of SVB.