June 21, 2023

At Banking Committee Markup, Warren Supports Bill to Hold Failed Bank Executives Accountable

“Legislation to claw back multi-million dollar compensation from failed bank executives needs to be iron-clad… It is critically important that our bank rules are also tough enough to withstand pressure from an army of bank lobbyists and financial industry lawyers who fight to weaken every regulation and create exceptions to every effort to hold banks and bank executives accountable.”

“There is more that we need to do – much more – but the RECOUP Act is a reasonable compromise that significantly improves the oversight of bank executives.”

Video of Hearing (YouTube)

Washington, D.C. – At an executive session of the Senate Banking, Housing, and Urban Affairs Committee to consider the FEND Off Fentanyl Act and RECOUP Act, U.S. Senator Elizabeth Warren (D-Mass.) expressed support for the RECOUP Act as a reasonable compromise that significantly improves the oversight of bank executives that blow up their banks and will make the banking system safer – and called on every member of the Senate and House to support the legislation. 

Senator Warren thanked a bipartisan group of ten other senators on the committee for joining with her to reintroduce the bipartisan Failed Bank Executives Clawback Act – the toughest bipartisan bill introduced to date to claw back compensation from failed bank executives following the crashes of Silicon Valley Bank and First Republic Bank. She also thanked Senators Catherine Cortez Masto (D-Nev.), Josh Hawley (R-Mo.), and Mike Braun (R-Ind.) for joining her as cosponsors for the bill’s original introduction. Senator Warren stressed that legislation to claw back multi-million dollar compensation from executives of failed banks needs to be iron-clad and resist lobbying efforts from armies of bank and financial industry lobbyists 

Senator Warren is an outspoken advocate for financial regulations that protect consumers, the financial system, and the economy. Since the crashes of First Republic Bank, Silicon Valley Bank, and Signature Bank, Senator Warren has led congressional action to hold bank executives accountable for gross mismanagement and to make significant reforms:  

  • On June 1, 2023, Senators Warren, 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 Cortez Masto, Hawley, and Braun, introduced 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.
  • On May 16, 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren blasted the former CEOs of Silicon Valley Bank and Signature Bank 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 Committee, Senator Warren 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 29, 2023, Senators Warren, Cortez Masto, Hawley, and Braun 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. 
  • 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-Silicon Valley Bank 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.

Transcript: Executive Session
U.S. Senate Committee on Banking, Housing, and Urban Affairs
June 21, 2023

Senator Elizabeth Warren: Thank you, Mr. Chairman.

I want to start by saying I’m glad that this committee passed the FEND Off Fentanyl Act, but if we want to have a real impact on fentanyl trafficking, we also need to cut off the money supply. We were in a hearing a couple of weeks ago in which we heard about 90, 9-0 Chinese companies that are sending the precursor drugs to Mexico, where they’re mixed up then into fentanyl and shipped around the world and to the United States. 

To be effective in the fight against this, then we need to deal with the crypto payments that have become the payment of choice for these drug traffickers. This is what our law enforcement and national security experts agree: that crypto is becoming the payment of choice and this committee needs to deal with better money laundering rules for crypto.

But let me turn to the RECOUP Act. Today, this committee takes up legislation to hold bank executives accountable when they blow up their banks. And I am particularly grateful to Chair Brown for his leadership on this issue. As chair of this committee, it is clear that he is committed to fundamental fairness and to a banking system that doesn’t just work for the wealthy and well-connected, but that works for every American.

Since March, our financial system has experienced the second, third, and fourth largest bank collapses in American history. 

Our current laws reward executives like the ones from First Republic, and SVB, and Signature, who placed risky bets with customers’ money, boosted short-term profits, scooped up huge bonuses and salaries, and walked away rich when their banks exploded and threatened the stability of the entire banking system.

When SVB bank failed back in March, both Republicans and Democrats came together to introduce the Failed Bank Executives Clawback Act. I want to offer special thanks to my early bipartisan partners, Catherine Cortez Masto, Josh Hawley and Mike Braun, who helped draft that first bill.

Our bill won substantial bipartisan support. Eleven of us – both Republican and Democratic members of the Banking Committee then reworked the bill and joined in. I want to thank JD Vance, and Katie Britt, and Kevin Cramer for their careful work in getting the details right and helping build a larger bipartisan coalition.

When drafting that bill, I felt – as I do now – that legislation to claw back multi-million dollar compensation from failed bank executives needs to be iron-clad: tough enough to cover every bad actor, tough enough so that all the types of payouts that they collected while running a bank are covered, and making sure that the multiple years of bad behavior that add up to catastrophic bank failures are also covered.

It is critically important that our bank rules are also tough enough to withstand pressure from an army of bank lobbyists and financial industry lawyers who fight to weaken every regulation and create exceptions to every effort to hold banks and bank executives accountable.  

There is more that we need to do – much more – but the RECOUP Act is a reasonable compromise that significantly improves the oversight of bank executives. It will help make the banking system safer for all Americans, and every member of Congress in both the Senate and the House should support it. I am proud that this Committee has answered President Biden’s call for greater accountability and I hope we can get this done quickly.

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