WASHINGTON, DC – Pennsylvania U.S. Senator John Fetterman yesterday participated in a Senate Committee on Banking, Housing, and Urban Affairs hearing on executive accountability after recent bank failures. The hearing comes in the wake of First Republic Bank’s collapse on Monday, the third bank to be seized by regulators in the past two months, following the collapse of Silicon Valley Bank and Signature Bank. Senators questioned the witnesses on the excessive risks taken by these banks, executive compensation, and the lack of accountability for bank executives.
During his line of questioning, Senator Fetterman focused on “moral hazard,” the idea that if consequences of risky moves are removed, there will not be incentive to safeguard against financial risk. He pressed witnesses on what role they felt moral hazard plays in bank executives’ decision-making and if these collapses were due to “incompetence, greed, or ‘virtuous risk’.”
“Mismanagement? Was that really clouded by greed? Were they just incompetent? I thought these were high achieving executives at successful banks. Or were they thinking ‘you know, we can just crash here, cause they’re going to come clean up our mess,’”Senator Fetterman pressed witnesses who answered they believed the collapses were due to mismanagement.
Senator Fetterman is a staunch proponent of executive accountability and fighting corporate greed. After the collapse of Silicon Valley Bank, he co-sponsored the Secure Viable Banking Act, which would restore critical protections to keep Big Banks in check & prevent future crises. He also supports the Failed Bank Executives Clawback Act, bipartisan legislation that would require federal regulators to claw back all or part of the compensation received by bank executives in the five-year period leading up to a bank failure.
The hearing was titled “Holding Executives Accountable After Recent Bank Failures” and witnesses included Ms. Da Lin, Assistant Professor of Law at University of Richmond School of Law; Mr. Thomas Quaadman, Executive Vice President of the Center for Capital Market Competitiveness at the U.S. Chamber of Commerce; and Professor Heidi Mandanis Schooner, Professor of Law at Columbus School of Law at Catholic University.
A recording of the full hearing can be found here.