Senators reintroduce bipartisan executive compensation bill

• Key insight: Sen. Elizabeth Warren, D-Mass., reintroduced a bipartisan bill requiring regulators to claw back compensation from executives of failed banks, with support from a bipartisan group of lawmakers. 
• What’s at stake: The proposal would allow regulators to reclaim pay earned in the five years leading up to a bank collapse, reviving an idea that gained traction after the 2023 failure of Silicon Valley Bank.
• Forward look: Despite cross-party backing, the bill faces long odds as lawmakers prioritize community bank regulatory relief. 

WASHINGTON — Senate Banking Committee ranking member Elizabeth Warren, D-Mass., has reintroduced her bipartisan bill to claw back the compensation of failed bank executives. 

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The bill echoes a similar measure offered in 2023, but this time is cosponsored by Sens. Josh Hawley, R-Mo., Catherine Cortez Masto, D-Nev., Ruben Gallego, D-Ariz., and Katie Britt, R-Ala. It picked up no new Republican cosponsors, but has support from several new Democrats on the Senate Banking Committee, such as Sen. Angela Alsobrooks, D-Md. 

The idea of shoring up rules to claw back the compensation of failed bank executives gained steam after the 2023 banking crisis, but sputtered out as many lawmakers went back to their home districts for campaign season. The concept picked up rare bipartisan support though, with then-Senate Banking Committee Chairman Sherrod Brown, D-Ohio holding a rare markup during his tenure atop the committee on his proposal with then-ranking member Tim Scott, R-S.C. 

Warren’s bill would require that federal regulators claw back all or part of the compensation received by a failed bank executive in the five-year period preceding the failure. 

“When big banks fail, weak regulators too often let the failed bank’s wealthy executives slip away into the night while American taxpayers foot the bill,” Warren said in a statement. “This bill helps ensure that failed bank executives are held accountable for their risk-taking — and that they forfeit the huge bonuses they got while driving their bank into the ground.”

The bill is being reintroduced on the third anniversary of Silicon Valley Bank’s failure. 

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

Despite having bipartisan support, the bill faces long odds of being enacted into law in this Congress. While Scott said he’s working on a banking policy package, the Warren proposal goes farther than his and Brown’s previous legislation and would likely face pushback among other lawmakers who want to prioritize community bank regulatory relief in any banking legislation that passes through Congress. 

On the same day, Warren and House Financial Services Committee ranking member Maxine Waters, D-Calif., sent a letter to Federal Reserve Vice Chair for Supervision Michelle Bowman asking whether the Fed will exercise its authority to impose penalties on Silicon Valley Bank’s executives. 

“Another year has passed and the Fed has still not exercised its

authorities to hold SVB executives accountable,” the lawmakers said in the letter. “The Fed has the authority to impose civil money penalties for unsafe and unsound practices and other legal violations. It also has the authority to ban executives from the banking industry if the unsafe or unsound practice or other legal violation caused financial loss for the bank.”