New Bipartisan Legislation Aims to Stop Bankers From Cashing in on Failure
Washington, D.C. — In response to the news that Senators Elizabeth Warren and J.D. Vance, as well as 10 co-sponsors, released new bipartisan legislation to stop bankers from making money when their banks fail, the American Economic Liberties Project released the following statement.
“The Failed Bank Executives Clawback Act of 2023 aims to stop irresponsible bankers from cashing in on failure,” said Shahid Naeem, Policy Analyst at the American Economic Liberties Project. “One simple principle drives the bill: Our financial system can be made more secure by disincentivizing bank executives from engaging in extraordinary risk.”
Recent bank failures in 2023, including those of Silicon Valley Bank, First Republic, and Signature Bank, saw executives rake in millions even as they brought their firms to the brink of collapse. While the FDIC has authority under the Dodd-Frank Act to claw back executive compensation from senior executives of big banks, it is limited to banks in particular circumstances within a limited timeframe. This bill further empowers the FDIC by widening the scope of individuals from whom compensation may be recovered, lengthening the clawback period to three years, and extending the types of banks covered — applying to all banks entering FDIC receivership with $10 billion or more in assets, representing a carve-out for smaller financial institutions.
Senator Warren and Vance’s bipartisan bill is is cosponsored by 11 members of the Senate Banking Committee who must vote on its passage, including Republican Senators Katie Britt and Kevin Cramer, and Democratic senators Catherine Cortez Masto, Bob Menendez, Mark Warner, Tina Smith, Raphael Warnock, John Fetterman, and Chris Van Hollen.
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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.