Executives from two of three banks that recently failed appeared in front of the Senate Banking Committee on Tuesday to respond to questions about why their banks went under and what regulators could have done to avoid the calamities.
Along with questions about how these banks failed, senators used the hearing to also address executive pay and whether senior executives in the U.S. are being rewarded more for short-term gains - like rising stock prices - than for ensuring their companies’ long-term health.
“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,” Brown said. “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.”
The anger over CEO pay echoes that of roughly 15 years ago, when the 2008 financial crisis led to taxpayer-funded bailouts of major banks. The CEOs and high-level bankers still received millions in pay and bonuses, most notably at nearly failed insurance conglomerate American International Group. Four senators - two Democrats and two Republicans - have introduced legislation that would give the Federal Deposit Insurance Corporation authority to claw back any pay made to executives in the five years leading up to a bank’s failure.
But the executives also have a lot to gain if they can sell their stock before the share price takes a steep dive. In prepared remarks for the Senate, Becker says he believed that these plans were “the most ethical means to manage this part of my compensation” and that his selling of Silicon Valley Bank stock before the bank failed was preplanned.
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