Wall Street Banker Accountability for Misconduct Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 3885 To amend the Bank Holding Company Act of 1956 to defer part of the compensation of senior employees of large bank holding companies (and their subsidiaries) for 10 years, to use such deferred amounts to pay any civil or criminal fines that may be levied on the bank holding company (or subsidiary), and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 23, 2019 Ms. GABBARD introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Bank Holding Company Act of 1956 to defer part of the compensation of senior employees of large bank holding companies (and their subsidiaries) for 10 years, to use such deferred amounts to pay any civil or criminal fines that may be levied on the bank holding company (or subsidiary), and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Wall Street Banker 4 Accountability for Misconduct Act of 2019’’. 5 VerDate Sep 11 2014 05:27 Jul 30, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS 2 •HR 3885 IH SEC. 2. FINDINGS. 1 The Congress finds the following: 2 (1) Senior employees of major bank holding 3 companies receive extraordinary pay packages, even 4 when they oversee massive frauds and financial mis- 5 conduct. 6 (2) Widespread financial misconduct by indi- 7 vidual Wall Street bankers led to the 2008 financial 8 crisis, which caused the Great Recession. The De- 9 partment of Justice brought litigation against every 10 major bank, resulting in more than 11 $163,000,000,000 in fines. 12 (3) This misconduct resulted from the actions 13 of individuals and was a direct result of a banking 14 culture that rewards bad behavior. 15 (4) Despite the actions of individuals, Wall 16 Street banks paid billions of dollars in fines out of 17 monies that otherwise were owned and could be paid 18 in dividends to shareholders. While culpable bankers 19 continued to receive extraordinary pay, innocent 20 shareholders paid the price for banker misconduct. 21 (5) In the aftermath of the Great Recession, 22 and after further misconduct in the financial serv- 23 ices industry, the Federal Reserve Bank of New 24 York has urged financial firms to reevaluate and re- 25 VerDate Sep 11 2014 05:27 Jul 30, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS 3 •HR 3885 IH form their compensation incentive structures to align 1 with shareholders and customers interests. 2 (6) Misaligned incentives within the banking in- 3 dustry continue to fail to hold Wall Street executives 4 and their senior employees accountable for their ac- 5 tions. 6 SEC. 3. DEFERMENT OF SENIOR EMPLOYEE COMPENSA- 7 TION. 8 The Bank Holding Company Act of 1956 (12 U.S.C. 9 1841 et seq.) is amended by inserting after section 5 the 10 following: 11 ‘‘SEC. 6. DEFERMENT OF SENIOR EMPLOYEE COMPENSA- 12 TION. 13 ‘‘(a) DEFERMENT FUND.—Each covered bank hold- 14 ing company and each subsidiary of a covered bank hold- 15 ing company shall establish a deferment fund, which 16 shall— 17 ‘‘(1) only contain compensation deferred under 18 subsection (b); and 19 ‘‘(2) only be used as permitted by this section. 20 ‘‘(b) DEFERMENT OF COMPENSATION.—Each cov- 21 ered bank holding company and each subsidiary of a cov- 22 ered bank holding company shall— 23 ‘‘(1) each year, defer the compensation of each 24 senior employee of the bank holding company or 25 VerDate Sep 11 2014 05:27 Jul 30, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS 4 •HR 3885 IH subsidiary in an amount equal to at least 50 percent 1 of the amount that the employee’s total compensa- 2 tion for the year exceeds 10 times the compensation 3 of the median paid employee of the consolidated 4 bank holding company for the year; 5 ‘‘(2) place all compensation deferred under 6 paragraph (1) into the deferment fund of the bank 7 holding company or subsidiary; and 8 ‘‘(3) after the end of the 10-year period begin- 9 ning on the date the compensation was deferred, if 10 sufficient funds remain in the deferment fund, pay 11 the senior employee the amount of compensation de- 12 ferred at the beginning of the 10-year period. 13 ‘‘(c) USE OF DEFERMENT FUND TO PAY FINES.— 14 If a covered bank holding company or subsidiary of a cov- 15 ered bank holding company is subject to a civil or criminal 16 fine, the bank holding company or subsidiary shall first 17 pay such fine out of amounts contained in the deferment 18 fund of the bank holding company or subsidiary. 19 ‘‘(d) CANCELLATION OF COMPENSATION THAT CAN- 20 NOT BE PAID FROM DEFERMENT FUND.—Each covered 21 bank holding company and each subsidiary of a covered 22 bank holding company shall have in place a policy that 23 cancels any compensation deferred under subsection (b) 24 VerDate Sep 11 2014 05:27 Jul 30, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS 5 •HR 3885 IH that cannot be repaid as described under subsection 1 (b)(3), due to the deferment fund lacking sufficient funds. 2 ‘‘(e) TREATMENT OF DEFERRED COMPENSATION OF 3 EX-EMPLOYEES.—With respect to an individual that has 4 compensation deferred pursuant to subsection (b), but is 5 no longer employed by the applicable bank holding com- 6 pany or subsidiary, if the bank holding company or sub- 7 sidiary is required to pay a fine from its deferment fund 8 for misconduct that occurred after the individual was no 9 longer employed by the bank holding company or sub- 10 sidiary, the bank holding company or subsidiary shall seg- 11 regate the individual’s deferred compensation from other 12 amounts in the deferment fund and shall not use such seg- 13 regated amounts for any purpose other than repaying the 14 individual pursuant to subsection (b)(3) or for the pay- 15 ment of another fine for misconduct that occurred while 16 the individual was still employed by the bank holding com- 17 pany or subsidiary. 18 ‘‘(f) RULEMAKING.—The Board may issue such rules 19 as the Board determines necessary to carry out this sec- 20 tion. 21 ‘‘(g) DEFINITIONS.—In this section: 22 ‘‘(1) COMPENSATION.—With respect to an em- 23 ployee, the term ‘compensation’ means any financial 24 remuneration, including salary, bonuses, incentives, 25 VerDate Sep 11 2014 00:06 Jul 31, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS 6 •HR 3885 IH benefits, severance, deferred compensation, or golden 1 parachute benefits, and any profits that would be re- 2 alized from the sale of the securities of the company 3 employing the employee. 4 ‘‘(2) CONSOLIDATED BANK HOLDING COM- 5 PANY.—With respect to a bank holding company, 6 the term ‘consolidated bank holding company’ means 7 the bank holding company and all subsidiaries of the 8 bank holding company. 9 ‘‘(3) COVERED BANK HOLDING COMPANY.—The 10 term ‘covered bank holding company’ means a con- 11 solidated bank holding company with more than 12 $250,000,000,000 in consolidated assets. 13 ‘‘(4) SENIOR EMPLOYEE.—The term ‘senior 14 employee’ means an employee of a covered bank 15 holding company or a subsidiary of the covered bank 16 holding company who— 17 ‘‘(A) has total compensation of more than 18 $1,000,000; 19 ‘‘(B) is identified by the bank holding com- 20 pany as one of the 100 most senior officers of 21 the consolidated bank holding company; 22 ‘‘(C) receives one of the 100 largest com- 23 pensation packages of the consolidated bank 24 holding company; 25 VerDate Sep 11 2014 05:27 Jul 30, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS 7 •HR 3885 IH ‘‘(D) receives compensation that is more 1 than 10 times the compensation of the median 2 paid employee of the consolidated bank holding 3 company; or 4 ‘‘(E) has the authority to commit or ex- 5 pose 0.5 percent or more of the capital of the 6 consolidated bank holding company.’’. 7 Æ VerDate Sep 11 2014 05:27 Jul 30, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\H3885.IH H3885 kjohnson on DSK79L0C42 with BILLS