U.S. Senator Katie Britt on Friday joined Senator J.D. Vance (R-Ohio), Senator Elizabeth Warren (D-Massachusetts), and a bipartisan group of colleagues in introducing the Failed Bank Executives Clawback Act. This legislation would enable federal regulators to claw back compensation from bank executives who are responsible for the reckless decisions that resulted in their institution’s failures.
“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 Sen. Britt. “This commonsense legislation will dissuade risky bank mismanagement and ensure that bad actors are held accountable.”
“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 Sen. 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.”
“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 Sen. 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 bill would expand the existing authority of the Federal Deposit Insurance Corporation (FDIC) to claw back the compensation of bank executives when they are found to have substantially contributed to the collapse of a financial institution by engaging in reckless business practices. Any funding that is clawed back will be directed to the FDIC’s Deposit Insurance Fund.
This legislation was introduced in light of the recent collapses of Silicon Valley Bank (SVB) in California and Signature Bank in New York. Sponsors claim that considering the cost of the institutions’ collapse to the FDIC’s Deposit Insurance Fund and impact to the broader banking sector, this legislation is needed to deter future bad actors.
Sen. Britt questioned former SVB CEO Greg Becker at a recent Banking Committee hearing, demanding answers about his responsibility in the bank’s collapse and his plans to give back the $1.5 million bonus he received.
“If the team would have known it was going to be the fastest rate in history, I believe they would have considered different decisions,” Becker testified. “Senator, I was the CEO of Silicon Valley Bank. I take responsibility for what ultimately happened.”
Co-sponsors of the bill also include U.S. Senators Bob Menendez (D-New Jersey), Mark Warner (D-Virginia), Kevin Cramer (R-North Dakota), Chris Van Hollen (D-Maryland), Tina Smith (D-Minnesota), Raphael Warnock (D-Georgia), John Fetterman (D-Pennsylvania.), Catherine Cortez Masto (D-Nevada), Josh Hawley (R-Missouri.), and Mike Braun (R-Indiana).
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