[Congressional Record Volume 169, Number 64 (Tuesday, April 18, 2023)]
[Senate]
[Pages S1212-S1213]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself and Mr. Grassley):
  S. 1181. A bill to amend the Federal Deposit Insurance Act to improve 
financial stability, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. REED. Madam President, today I am introducing the Bank Management 
Accountability Act along with Senator Grassley. This bipartisan bill 
will make it easier for banking regulators to claw back compensation 
from directors and senior executives at failed systemically important 
banks and to ban those directors and executives from future 
participation in the financial industry.
  We have recently experienced the failures of Silicon Valley Bank and 
Signature Bank, two systemically important banks each with assets 
exceeding $100 billion. Executives at these banks received exorbitant 
compensation as the banks took on excessive risks. The CEO of Silicon 
Valley Bank received $10 million in compensation in 2022 and sold $3.5 
million of company stock in the days before the failure. The CEO of 
Signature Bank received $8.7 million in compensation in 2022 and sold 
millions of dollars' worth of company stock in the weeks and months 
before the failure.
  The government declared the failures of Silicon Valley Bank and 
Signature Bank a ``systemic risk'' to the economy and stepped in with 
extraordinary backstops and emergency assistance, including protecting 
uninsured depositors. While these actions prevented contagion from 
spreading throughout

[[Page S1213]]

the financial system, these two failures are expected to cost the 
Federal Deposit Insurance Corporation's, FDIC's deposit insurance fund 
over $20 billion and have required the Federal Reserve to extend over 
$143 billion in credit to their successor banks. The FDIC needs 
stronger tools to prevent directors and senior executives from 
enriching themselves when their risky bets destabilize the financial 
sector and saddle the American people with the costs.
  The bipartisan bill we are introducing aims to update the FDIC's 
outdated compensation clawback authority and weak financial industry 
ban authority. This bill will make directors and senior executives 
think twice before engaging in risky activities by allowing the FDIC to 
claw back the prior 2 years of their compensation if their bank fails. 
And to ensure that directors and senior executives cannot return to 
another bank and place depositors' funds at risk again, the bill would 
make it much easier for the FDIC to prohibit them from participating in 
the affairs of any financial company for at least two years.
  Under existing law, high standards of liability significantly 
interfere with regulators' ability to seek restitution from directors 
and officers of failed banks and bar them from the industry. After the 
2008 financial crisis, Congress established much more powerful clawback 
authority. But this tool is only available when the largest banks are 
unwound using a special process called ``orderly liquidation 
authority'' that the regulators have never used--even for the failures 
of Silicon Valley Bank and Signature Bank. That is why directors and 
senior executives at large banks rarely are subject to compensation 
clawbacks and financial industry bans, even if they are negligent in 
running their bank and the government ultimately needs to step in with 
extraordinary backstops and emergency assistance.
  Our bill would apply the easier rules for clawing back compensation 
from Dodd-Frank's special ``orderly liquidation authority'' to a much 
broader set of banks, including Silicon Valley Bank and Signature Bank. 
It would also specify that recouped funds may not be paid out of 
directors' and officers' liability insurance coverage to make sure that 
they have true personal liability and skin in the game. Finally, it 
would lower the standard for barring directors and senior executives at 
failed systemically important banks from the financial industry. These 
updates would greatly enhance the banking regulators' ability to 
recover funds for the benefit of the taxpayers, to protect depositors 
from directors and senior executives who have already driven a bank 
into failure, and to provide powerful disincentives against excessive 
risk taking.
  All of our constituents deserve strong bank regulators with the 
necessary tools to go after executives and directors at banks whose 
failures threaten the economy. The Bank Management Accountability Act 
will enhance our regulators' authorities to demand meaningful 
accountability from Wall Street and Silicon Valley, which in turn will 
increase confidence in our financial system. I urge our colleagues to 
support this important bipartisan legislation.

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