Under this proposed legislation, the Federal Deposit Insurance Corp. would be authorized to recover bonuses and stock sale proceeds paid to executives of failed banks from the two years preceding the banks’ collapses. Additionally, the banking regulator would have the ability to impose penalties of up to $3 million for reckless mismanagement.
Previously, Senators Elizabeth Warren (D-Mass.) and J.D. Vance (R-Ohio) introduced a bill that would allow regulators to impose even harsher penalties on executives. However, Warren has now supported the compromise bill put forth by Brown and Scott.
In March, the Biden administration urged Congress to strengthen regulators’ ability to hold bank executives personally accountable for the failures of their institutions. This call came after the collapse of Silicon Valley Bank, which in turn destabilized the banking sector and led to the downfall of two additional lenders, Signature Bank and First Republic.
According to reports, federal investigators are currently examining $3.6 million in stock sales made by Silicon Valley Bank’s CEO, Greg Becker, in the days before the bank’s collapse.
Natalia Renta, senior policy counsel at Americans for Financial Reform, described the advancement of the bill as “an important step the public has been craving.” However, she noted that there is still more work to be done in the wake of this year’s banking crisis.
Meanwhile, the banking industry groups have largely remained silent on this proposed legislation.
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