Warren teams up with Vance on bill to claw back earnings from CEOs of failed banks
Zachary Halaschak
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Sens. Elizabeth Warren (D-MA) and J.D. Vance (R-OH) have teamed up on a bill to punish executives of big banks that end up failing.
The legislation unveiled Thursday makes odd bedfellows of the two — Warren is one of the most liberal lawmakers in Congress, and Vance one of the more conservative. Still, both say the legislation will help prevent future failures, like that of Silicon Valley Bank, by incentivizing bank CEOs to prevent their institutions from collapsing.
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The bill would require the Federal Deposit Insurance Corporation to claw back pay for executives that led banks that go under. The plan, which applies to institutions with more than $10 billion in assets, would target executive compensation in the three years leading up to a bank’s failure.
“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,” Warren said in a statement.
The duo hopes to get a vote on the proposal in the Senate Banking Committee, which is chaired by Sen. Sherrod Brown (D-OH). The legislation already has the backing of nearly a dozen senators in the 23-member committee.
Warren approached Vance about her proposal amid the chaos of SVB’s sudden and dramatic failure earlier this year. The bill has attracted other Republican support as well, with Sens. Katie Britt (R-AL) and Kevin Cramer (R-ND), who are both on the Banking Committee, also backing the plan.
“Bank CEOs pay themselves fat bonuses as they run their banks into the ground. Often taxpayers then pick up the tab. It’s time to give taxpayers the ability to fight back,” Vance tweeted on Thursday after the bill was announced.
SVB’s collapse created turmoil in the banking system and sparked fears that it could start a contagion leading to a chain of failures. Since SVB’s downfall, other banks have met their demise, but the fallout was contained in part through the federal government’s decision to back all deposits in Silicon Valley Bank and Signature Bank, which also failed, including those in excess of the FDIC’s $250,000 threshold.
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The central bank also rolled out a new source of funding for banks that might face runs by depositors, called the Bank Term Funding Program. The Bank Term Funding Program offers up to one-year loans to banks and other financial institutions.
Lawmakers got the opportunity to grill SVB’s former CEO, Greg Becker, during a congressional hearing last month. The Fed has said that SVB leadership failed to manage basic interest rate and liquidity risk, although it did acknowledge that Fed supervisors failed to take forceful enough action to curb risks in the lead-up to the failure.