Executives from two of three recently failed banks testified before the Senate Banking Committee Tuesday about their collapses and how to avoid future such incidents.
Senators also used the hearing to address executive pay and whether senior business leaders are being rewarded for short-term gains, such as stock price increases, rather than ensuring long-term stamina.
The executives of the three recently failed banks—Silicon Valley Bank (SVB), Signature Bank and First Republic Bank—were paid millions during their tenures, the bulk of which came in the form of company stock.
Even though that stock is now largely worthless, the CEOs still made millions from planned sales of their shares before their banks’ failures.
“You were paying out bonuses until literally hours before regulators seized your assets. To people in Ohio and around the country, this feels sickeningly familiar,” Banking Chair Sen. Sherrod Brown (D-OH) said in his opening statement. “To most Americans, a lack of Wall Street accountability tracks with their entire experience with our economy. Workers face consequences; executives ride off into the sunset.”
SVB CEO Greg Becker received roughly $9.9 million in 2022. He sold company stock just a few weeks before the bank collapsed. Signature Bank CEO Joseph DePaolo also sold stock in the years leading up to its failure.
Citing health concerns, DePaolo did not testify before the Senate, instead sending the failed bank’s president in his place.
Four Senators—Elizabeth Warren (D-MA), Josh Hawley (R-MO), Catherine Cortez Masto (D-NV) and Mike Braun (R-IN)—have recently introduced bipartisan legislation that would give the Federal Deposit Insurance Corporation (FDIC) authoritiy to claw back any pay that failed banks execs made during the five years leading up to a collapse.
First Republic and SVB were the two largest bank collapses in the U.S. since Washington Mutual failed during the 2008 financial meltdown that led to the Great Recession. Their takeovers and sales this year has cost the FDIC tens of billions of dollars.