Tim Scott Part Of Bipartisan Effort To Water Down Penalties On Bad Bankers

Scott Olson/Getty Images

Daily Caller News Foundation logo
Will Kessler Contributor
Font Size:

Republican Sen. Tim Scott has joined forces with Democratic Sen. Sherrod Brown on a new bill that would penalize executives who oversaw failed banks, placing it at odds with more stringent bipartisan legislation proposed by other lawmakers.

Democrat Sen. Elizabeth Warren and Republican lawmakers recently proposed similar legislation that would not only punish executives, but also directors and controlling shareholders, which has garnered support from almost half of the members of the Senate Banking Committee. Scott, ranking member on the committee, and Brown, chairman of the committee, unveiled their bill Thursday after a series of bank failures, beginning with the collapse of Silicon Valley Bank (SVB), that stoked national fears of a widespread banking crisis. (RELATED: Meet The CEO Whose Failed Bank Was Bailed Out By The Biden Administration)

Both bills would give power to regulators to take back compensation from top executives in the event of a bank failure, putting the blame on the bank leadership, according to the bills. Regulators would be able to impose fines in order to confiscate various forms of compensation like bonuses and stock sell-offs and bar executives from working further in the industry.

Yet, Scott and Brown’s bill differs from Warren’s legislation in that it would only extend back two years instead of three to recoup compensation, would not include the confiscation of salaries received by bank executives and would not apply to all directors and controlling shareholders.

The Scott bill would also give discretion to regulators, enabling them to fine executives for compensation but not requiring them to.

A spokesperson for Scott said that its penalties are more targeted and still adequately stringent, imposing fines on top executives and barring failed CEOs from working in the industry. Scott also argues that clawing back three years’ worth of compensation could mean that “good executives are discouraged from joining banks.”

Scott’s bill targets CEO stocks and bonuses because that’s where they receive the majority of their income, rather than salaries, the spokesperson added.

“The recent bank failures didn’t happen in a vacuum – the banks’ executives failed to manage their risk, regulators failed to exercise their supervisory responsibilities, and the Biden administration failed to stop spending, which led to rising interest rates,” Scott said in a statement unveiling the legislation. “I look forward to continuing the hard work of demanding more answers from the Biden Administration and ensuring our nation never experiences these types of preventable failures again.”

Republican Sen. Josh Hawley, a co-sponsor with Warren on the earlier bill, said, “I’m just really worried that that’s going to get watered down,” in response to the new legislation, according to Politico.

The string of bank failures began with SVB’s collapse in March after panicked depositors pulled their money, causing a bank run that plunged the bank’s stock by 60%.

Other banks, like Signature Bank and First Republic Bank, failed shortly after SVB. The federal government spent $13 billion to take over and sell First Republic Bank to JPMorgan and Chase in March, according to a press release from the Federal Deposit Insurance Corporation.

Editor’s note: This article has been updated with additional information about Sen. Tim Scott and Sen. Sherrod Brown’s bank regulation bill.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.