Senators make headway on clawing back pay from failed banks' CEOs, as key committee advances bill
By Victor Reklaitis
Senate Banking Committee backs bipartisan legislation from Sherrod Brown and Tim Scott
U.S. lawmakers made further progress Wednesday in a bipartisan push to take back pay from executives at failed banks, as the Senate Banking Committee advanced a bill that would permit regulators to claw back compensation received in the two years before a failure.
The measure -- dubbed the Recoup Act -- was rolled out last week by the committee's chairman, Democratic Sen. Sherrod Brown of Ohio, and Republican Sen. Tim Scott of South Carolina, a presidential candidate. It was backed by the Senate Banking Committee in a 21-2 vote on Wednesday.
Ahead of Wednesday's vote, Capital Alpha Partners analyst Ian Katz suggested in a note that the bill's backers had "some negotiating left to do with Sen. Elizabeth Warren," as the Massachusetts Democrat "has pushed for a harsher bill."
The Brown-Scott measure then ended up getting amended, and Warren voted for it, describing the bill as a "reasonable compromise."
Warren's bill, called the Failed Bank Executives Clawback Act, would require that regulators take back all or part of the compensation that execs received in the three years before their bank's failure. It had drawn support from Republicans such as Ohio Sen. J.D. Vance and Missouri Sen. Josh Hawley.
See:Elizabeth Warren, J.D. Vance team up to claw back failed banker pay
The Recoup Act's prospects in the Republican-run House aren't clear, but President Joe Biden has expressed support for clawbacks. He urged Congress in a March speech to make it easier for regulators to take back compensation from execs after the failures of Silicon Valley Bank (SIVBQ) and New York's Signature Bank(SBNY).
A bill aimed at bankers' pay has a chance of becoming law, but it isn't likely to rock the sector (KBE), according to Capital Alpha's Katz.
"While this is headline-grabbing legislation and has the potential to pass both chambers of Congress and become law, we don't expect it to change much in the way banks operate, since no bank executive goes into the job expecting his/her bank to fail," the analyst said.
Now read:Justice Department to weigh updating banking competition rules
-Victor Reklaitis
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
06-22-23 1408ET
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