WASHINGTON–In a bipartisan vote, the Senate Banking Committee has agreed on a bill that would stiffen penalties for executives of failed banks, increase oversight of the Federal Reserve and restrict takeovers by megabanks.
The committee approved the bill in a 21-2 vote, overcoming a disagreement between Senate Banking Chair Sherrod Brown (D-OH), who negotiated the legislation with Sens. Tim Scott (R-SC), and Elizabeth Warren (D-MA.) As CUToday.info reported earlier, Warren has been advocating for her own bill but she called the newly created bill a “reasonable compromise.”
The legislation comes in the wake of the failures of Silicon Valley Bank, Signature Bank and First Republic Bank that, shortly before being taken over by the government and then sold to other larger banks, paid out bonuses to employees and members of senior management.
The only votes against the bill came from Sens. Thom Tillis (R-NC) and Bill Hagerty of (R-TN).
‘Huge Victory for Consumers’
“For years and years, we’ve tried to hold banks accountable,” Brown was quoted by Politico as saying. “Of course, there will be some people that think it didn’t go far enough or went too far. This is a huge victory for consumers, for the banking system, for honest bankers and for the whole country.”
According to Politico, Brown and Scott’s compromise, “which united progressives, conservatives and moderates on the committee, represents Congress’s most viable political option for revamping the banking system…The bill reflects a focus by lawmakers on executive mismanagement and regulatory supervision failures. President Joe Biden has urged Congress to send him a bill that would strengthen executive accountability.
House Republicans have not pursued similar legislation to crack down on executives, though they may be enticed by a provision that would beef up oversight of the Fed…”
McHenry May be Open to Plan
The report further noted that on the other side of Congress, House Financial Services Chair Patrick McHenry (R-NC) has “yet to outright dismiss the plan, which was negotiated by Scott as he seeks the GOP presidential nomination.” McHenry has said his panel will review it.
The bill negotiated by Scott and Brown, who is also facing a tough reelection campaign in the red state of Ohio, would empower regulators to claw back compensation from leaders of failed banks. It would expose the executives to higher civil penalties and bans from working in the industry, according to Politico.
It also requires the Fed to report publicly on its bank supervision practices and changes to its internal culture, and introduce new hurdles for the biggest banks to acquire failed lenders, the report added.
‘They Don’t Like It’
As for the banking industry’s response, Brown was quoted by Politico as adding, “They don’t like it. But most bankers I talked to think what Silicon Valley Bank did was both greedy and incompetent and they don’t want to be tarred with that brush.”
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