WASHINGTON — Between a tough upcoming Senate race and pressure from the Democratic party's more progressive core, Senate Banking Committee Sen. Chair Sherrod Brown has a narrow tightrope to walk at Wednesday's
It will be the first markup since Brown took control of the committee after Democrats won the Senate in 2020. Brown, D-Ohio, and ranking member Sen. Tim Scott, R-S.C., plan to discuss their version of a bill that would give the Federal Deposit Insurance Corp. more ability to take back the compensation of failed bank executives.
The legislation took
Silicon Valley Bank CEO Greg Becker drew particular ire in light of certain decisions that he made before the bank failed, which in the eyes of some lawmakers led to SVB's downfall.
It could be a smart move politically for both Brown and Scott to pass some kind of legislation on executive compensation, even if the bill isn't exactly what either party would fully prefer. Brown faces one of the toughest Democratic reelection battles in 2024, and Scott is challenging former President Donald Trump in the Republican presidential primary.
"Something, here, is better than nothing," said Todd Phillips, principal at Phillips Policy Consulting.
With support from the panel's chair and ranking member, the bill is likely to pass through the committee, which would be an impressive accomplishment for Brown and Scott ahead of election season, especially in a Congress that's been notoriously gridlocked when it comes to policy discussions.
"If compensation reform becomes real, it will be the most consequential change on Wall Street in eons," said Bartlett Naylor, financial policy advocate at Public Citizen and a former Senate Banking Committee staffer.
The legislation is being considered, however, amid tensions with lawmakers who would prefer more sweeping measures.
In fact, both bills have bipartisan support. Brown's legislation was negotiated with Scott, while Warren's has the backing of Republicans Vance, Katie Britt of Alabama, Kevin Cramer of North Dakota, Josh Hawley of Missouri and Mike Braun of Indiana.
The Brown-Scott bill is smaller in scope than Warren's. While the Brown-Scott bill gives the FDIC clear authority to rescind the compensation of failed bank executives, it doesn't make the clawbacks mandatory, as Warren's would.
The Brown-Scott bill also doesn't cover the salary of failed bank CEOs — focusing instead on bonuses and other discretionary income. Warren's bill would also mandate clawbacks for three years, instead of the two years covered by the chairman and ranking member's bill.
At Wednesday's markup, Warren is expected to introduce amendments that would make the Brown-Scott bill hew more closely to her own, according to a person familiar with the matter.
Vance plans to introduce his own amendments, including one that would strengthen an existing prohibition on mergers involving banks that hold more than 10% of the country's deposits, according to copies of the amendments obtained by American Banker.
Another amendment by Vance would move oversight of state-chartered banks with more than $100 billion of assets to the Office of the Comptroller of the Currency. That proposal would capture institutions such as Truist Financial, which is overseen by North Carolina banking authorities.
"Chair Brown is working with Senator Scott to review relevant amendments," a spokesperson for Brown said. "Their goal is to pass the most robust and comprehensive bill out of committee with strong bipartisan support so that it has the best chance at making it to the president's desk."
That practical approach has permeated legislative efforts to respond to the recent bank failures, especially when it comes to executive compensation.
"Congress should implement as strong of provisions as it can get," Phillips said. Regarding what those provisions might look like, he added: "Only the legislators themselves can figure that out."
Isaac Boltansky, managing director and director of policy research at BTIG, said that it's difficult to say if Warren's amendments will be seriously considered, given the rarity of Senate Banking Committee markups in recent years.
"Our base case, though, is that an agreement between the chair and the ranking member is designed to move with minimal friction," he said.
After Wednesday's markup, the bill will have to be reviewed by the Republican-controlled House, where its future is less certain.
House Financial Services Committee Chairman Rep. Patrick McHenry hasn't closed the door entirely on executive compensation legislation. But the North Carolina Republican has signaled that the panel's focus lies elsewhere in the wake of this year's bank failures.
"The Committee will take a look at any bill that is advanced by the Senate Banking Committee, including on executive compensation clawback," a spokesperson for the House Financial Services Committee said.
"It is important to note that the regulators already possess the necessary authorities to claw back executive compensation," the committee spokesperson said. "The underlying issue the House Financial Services Committee has been focused on addressing is the lack of transparency and accountability surrounding bank regulators' decision-making in crisis situations."
