Congress struggles with CEO clawbacks

Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy.

Apr 03, 2023 View in browser   By Zachary Warmbrodt and Eleanor Mueller Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. Lawmakers from both sides of the aisle are rallying behind President Joe Biden’s call to strengthen penalties for the executives at failed banks. But they have a short window to act and aren’t exactly coordinating as a clash with industry looms. By MM’s count, at least four executive accountability bills are germinating among members of the Senate Banking Committee alone. The primary goal is to make it easier for the government to claw back compensation from the CEOs of failed banks. Sen. Elizabeth Warren (D-Mass.) has made the biggest splash so far with a clawback bill co-sponsored by Republican Sens. Josh Hawley of Missouri and Mike Braun of Indiana. Sen. Mark Warner (D-Va.) has his own legislation, while Senate Banking Chair Sherrod Brown (D-Ohio) and Sen. Chris Van Hollen (D-Md.) have said they’re working on their own bills. "I talked to Senator Warren about it a little bit,” Sen. J.D. Vance (R-Ohio) said. “I think it was her idea. If it comes to the floor I'll likely vote for it." Will the proposals go anywhere? Even with backing from the president and bipartisan support, lawmakers are already signaling it will be tough to get done. Some House conservatives are balking. Rep. Byron Donalds (R-Fla.) said it’s “having government agencies decide compensation in a backdoor way” — what he calls “Monday morning quarterback stuff.” One of the biggest challenges is simply the calendar, and the likelihood that political urgency wanes as the banking system appears to stabilize. “We want to do it as quickly as possible,” Brown said last week. “People are really interested in it now. We know that when the … cameras are turned off and they go away, they lose momentum. That’s how powerful interest groups here work. They can slow things down enough that then they win.” Brown is right to signal that industry will fight the effort vigorously. Bank trade groups have yet to come out publicly against it, but as one bank lobbyist put it to MM, restricting executive pay is an issue that “engages the CEOs in ways that other regulations don’t.” “We think it’s such a good idea it should apply to all industries, and legislatures,” another banking industry source said. Even Braun, who is co-sponsoring Warren’s bill, said the odds are stacked against it now that the banking system appears to be on stronger footing. “Hardly any of them will get across the finish line, most likely because it's now fixed,” the Indiana Republican said. And to be sure, lawmakers could lean on regulators to accomplish at least some of their goals. Financial regulatory agencies have yet to finalize executive compensation restrictions mandated by the 2010 Dodd-Frank law, including clawback requirements. It’s been one of Dodd-Frank’s most delayed components, with proposals issued in 2011 and then in 2016 but never implemented. Agencies could hypothetically release a so-called interim final rule to make the safeguards effective while continuing to take public comment. “However well-intentioned, current legislative proposals have a snowball’s chance in hell of actually being adopted,” said Klaros Group partner Michele Alt, who worked on the rulemaking at the OCC. “But what is absolutely possible is for the regulators to act quickly and decisively to implement a law that’s already on the books.” Happy Monday morning — What do you think about clawing back CEO pay at failed banks? What’s happening with the Dodd-Frank executive compensation rule? Let us know: Zach Warmbrodt, Sam Sutton.   GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat.     Driving the Week The House and Senate are gone for two weeks … Monday … Fed Vice Chair for Supervision Michael Barr meets with regional bank CEOs (more below) … Fed Governor Lisa Cook talks about the economy at a University of Michigan event at 4:15 p.m. … Tuesday … Outgoing World Bank President David Malpass speaks at the Atlantic Council at 10 a.m. … Wednesday … The CFTC’s agricultural advisory committee meets at 9 a.m. … Ajay Banga, candidate for World Bank president, discusses the future of the bank at a Center for Global Development event at 10 a.m. … Brookings hosts an event on lifting the deposit insurance cap at 10 a.m. … Friday … March employment data is released at 8:30 a.m. … Driving the Day A timely meeting — Fed Vice Chair for Supervision Michael Barr is scheduled to talk with regional bank CEOs in Washington today, according to sources briefed on the discussion. The private meeting has been on the books for months, and Barr isn’t expected to make any announcements. The executives invited to participate represent banks in the $100 billion to $250 billion asset range — the same group of lenders that the Biden administration wants to see more stringently regulated. Drop us a line and let us know how it goes. Surprise: OPEC+ to cut output  — The oil cartel on Sunday announced an unexpected production cut of more than 1 million barrels per day, setting up a new headwind in the fight against inflation. The FT reports that the move will further stoke Saudi-U.S. tensions over energy prices. “People familiar with Saudi Arabia’s thinking say Riyadh was irritated last week that the Biden administration publicly ruled out new crude purchases to replenish a strategic stockpile that had been drained last year as the White House battled to tame inflation.” Oil prices surged on the news. Swiss government investigates UBS-Credit Suisse deal — The Swiss prosecutor’s office said the intention of the probe is to “analyze and identify any criminal offenses,” according to POLITICO Europe. Our colleagues across the pond note that the deal has been unpopular locally, with the merged company expected to slash jobs. Policy and Politics Tim Scott’s tough road to the White House — Marianne LeVine reports that even the South Carolina Republican’s fans on Capitol Hill are wondering if he can break through in a Republican presidential primary. Scott is the top Republican on Senate Banking. “The Trump lane, the anti-Trump lane, the more-than MAGA, I don’t think he fits in those things,” Sen. Mitt Romney said. Crypto Another one bites the dust — Coindesk reports that the exchange Bittrex will shut down its U.S. platform after nine years of operation, but will continue on in other regions including Europe, Canada and South America. “It’s just not economically viable for us to continue to operate in the current U.S. regulatory and economic environment,” Bittrex co-founder and CEO Ritchie Lai said in a statement. WSJ reports that Hong Kong is getting a boost from the U.S. crackdown, as it tries to attract crypto firms. Fly Around Further reading on bank turmoil from AFR — Americans for Financial Reform has a new newsletter, which the group describes as "a cogent email of curated information on the banking crisis and the response.”   JOIN POLITICO ON 4/5 FOR THE 2023 RECAST POWER LIST: America’s demographics and power dynamics are changing — and POLITICO is recasting how it covers the intersection of race, identity, politics and policy. Join us for a conversation on the themes of the 2023 Recast Power List that will examine America’s decision-making tables, who gets to sit at them, and the challenges that still need to be addressed. REGISTER HERE.       Follow us on Twitter Mark McQuillian @mcqdc Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton   Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings This email was sent to rouf@idiot.cloudns.cc by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA Please click here and follow the steps to unsubscribe.