A bipartisan group of senators, led by Senate Banking, Housing and Urban Affairs ranking Democrat Sen. Elizabeth Warren of Massachusetts, has introduced legislation that would require the FDIC to claw back compensation from failed banks with assets of $10 billion or more.
“The bill would require the Federal Deposit Insurance Corporation (FDIC) to hold executives of large failed banks — like Silicon Valley Bank, which failed three years ago…— financially responsible for some of the costs those failures impose on the rest of the banking system and the economy,” Warren’s office said, in outlining the bill, S. 4050. “The FDIC would have to claw back all, or part of the compensation large bank executives received over the three-year period preceding a bank’s failure.”
Joining Warren in introducing the legislation, known as the Failed Executives Clawback Act of 2026, were Republican Senators Josh Hawley of Missouri, and Katie Britt of Alabama and Democrats Catherine Cortez Masto and Ruben Gallego.
Similar legislation was introduced during the last Congress but was not enacted.
Warren’s staff said that the legislation would help ensure that big bank executives “are not allowed to collect massive paychecks and bonuses, disregard prudent risk management, and walk away scot-free if the bank blows up.”
“When big banks fail, weak regulators too often let the failed bank’s wealthy executives slip away into the night while American taxpayers foot the bill,” Warren said, in a statement. “This bill helps ensure that failed bank executives are held accountable for their risk-taking — and that they forfeit the huge bonuses they got while driving their bank into the ground.”
“Bank executives who make risky investments with customers’ money shouldn’t be permitted to profit in the good times, and then avoid financial consequences when things go south,” Hawley said, in a statement. “This legislation puts the executives’ own profits on the line, and that’s exactly as it should be.”
Although the legislation if passed into law may curtail risk, it may also discourage qualified executives from accepting appointments with insured depository institutions or make it hard for depository institutions under stress and in need of new management to recruit such management. Further, the legislation ignores the fact that some failures are caused by asset-quality deterioration over years that cannot reasonably be predicted or that occur under the eyes of examiners that have raised no issues.