Reports show that a coalition of senators headed by J.D. Vance (R-Ohio) and Elizabeth Warren (D-Massachusetts) presented a bill to renew attempts to recover bonuses paid to executives of failed or resolved large banks.
The Failed Bank Executives Clawback Act was presented by 11 senators who are all on the Senate Banking, Housing, and Urban Affairs Committee. If the bank fails or is resolved, the measure would empower federal authorities to take back up to three years of remuneration paid to the CEO, board members, controlling owners, and other key persons.
If a bank fails and causes substantial losses for the banking system and the economy as a whole, the Federal Deposit Insurance Corporation (FDIC) has little power to recover compensation paid to its executives under present standards.
A report shows that Warren urged lawmakers to take President Joe Biden up on his call for tougher penalties for CEOs of failing banks seriously and pass legislation to that effect.
In March, Biden recommended that Congress provide the FDIC the ability to punish bank management and bar executives from returning to the sector again if a bank fails.
Vance said U.S. taxpayers shouldn’t have to pay for CEOs’ risk-taking and mismanagement.
If the government were to guarantee deposits beyond $250,000, Senator Mike Braun (R-Indiana) says bank executives could need more of an incentive to manage risk responsibly.
Former Silicon Valley Bank CEO Gregory Becker received approximately $10 million in salary in 2022. Joseph DePaolo, the former CEO of Signature, earned over $9 million that year. First Republic’s CEO, Michael Roffler, earned $900,000 and an additional $2.95 million in incentives in 2022.
According to a statement with the Securities and Exchange Commission, Becker sold over $3.5 million worth of SVB shares 11 days before U.S. banking officials closed his bank.
The Federal Deposit Insurance Corporation (FDIC) bailed out depositors with balances in excess of $250,000 two days later, according to a Treasury Department announcement.