Cortez Masto received some assurances on accountability, but federal regulators say legislation is needed to fill in gaps
Washington, D.C. – Today, at a Senate Banking, Housing, and Urban Affairs Committee Hearing, U.S. Senator Catherine Cortez Masto (D-Nev.) raised the alarm about Silicon Valley Bank and Signature Bank executives taking bonuses in the final days before their banks failed. Cortez Masto pushed federal regulators to hold them accountable by clawing back executive compensation.
FDIC Chair Martin Gruenberg responded by saying the FDIC has substantial authority to “impose money penalties, restitution, and banning individuals” from the banking industry depending on the findings of their investigation, which they are pursuing swiftly. Federal Reserve Board Vice Chair for Supervision Michael Barr highlighted that the Fed has authority to impose penalties and ban from the industry those who violate the law, engage in unsafe practices, or breach their fiduciary duty, “even after a bank fails.” And U.S. Treasury Department Undersecretary Nellie Liang echoed both statements.
While Cortez Masto received some assurances from federal regulators, FDIC Chair Gruenberg underscored the need for legislation to claw back compensation due to bank mismanagement.
“We do not have, under the Federal Deposit [Insurance] Act, explicit authority for claw back of compensation. We can get to some of that with some of our other authorities. We had that specific authority under Title II of the Dodd-Frank Act. If you are looking for an additional authority, specific authority under the FDI Act, it would probably have some value there,” added FDIC Chair Gruenberg.
Under current federal law, federal regulators have authority to claw back executive payments if there is criminal negligence in the lead up to a bank failure, but this authority does not extend to gross mismanagement by bank executives.
As the former top law enforcement official in Nevada, Senator Cortez Masto has been a leading voice in the fight to protect consumers from fraud throughout her career. She has sounded the alarm on increasing check fraud scams, which cost consumers more than $800 million last year. She also introduced legislation to protect American consumers who sue corporations for fraud and to protect and support whistleblowers reporting misdeeds to the Consumer Financial Protection Bureau. During the Trump Administration, she spoke out frequently about his nominees’ efforts to weaken the Consumer Financial Protection Bureau and leave consumers without restitution. In 2020, she helped secure passage of legislation to deter disruptive and potentially harmful phone calls and texts.