Dodd-Frank News Center

reasury Department seeks extension of TARP executive compensation standards information collection

This story appeared in Bank Digest.                                  

The Treasury Department is proposing to extend, without change, an existing information collection entitled "TARP Capital Purchase Program--Executive Compensation." It has also announced that it will submit the proposal to the Office of Management and Budget for review and clearance.                                  

The collection is related to executive compensation and corporate governance standards to which certain entities receiving financial assistance from Treasury under the Troubled Asset Relief Program are subject. Comments should be received by Oct. 27, 2017.

Senators request that regulators strengthen 'clawback' rule

This story appeared in Bank Digest.

In light of a recent scandal at Wells Fargo in which employees created numerous unauthorized deposit and credit card accounts, Sens. Bob Menendez (D-NJ), Tammy Baldwin (D-Wis), and Al Franken (D-Minn) have led a group of Democratic senators in sending a letter to federal regulators requesting that they strengthen a proposed "clawback" rule pursuant to the Dodd-Frank Act that aims to prohibit executive pay arrangements that promote excessive risk-taking or misconduct in the financial services industry.

Referring to Wells Fargo executives "who were both aware of the behavior and were instrumental in designing policies that led to the scandal" but who had "received hundreds of millions of dollars in bonus compensation," the senators said "we need tough rules that will ensure that executives who engage in this type of misconduct will have their bonuses clawed back so we can deter similar actions in the future."

They went on to list what they believe are three weaknesses in the proposed rule: the deferral period for bonuses (in which bonus pay is withheld for a period of time to determine if significant misconduct has occurred) is too short; clawbacks and downward adjustments of compensation are optional, not mandatory; and the triggers for clawbacks are too limited.

Financial Services Committee Democrats request stronger 'clawback' rule for executive bonuses

This story appeared in Bank Digest.

House Financial Services Committee Ranking Member Maxine Waters (D-Calif) and 10 committee Democrats have written to federal financial regulators urging them to strengthen a proposed "clawback" rule regarding when a financial institution must revoke senior executives' bonuses in light of a recent settlement involving fraudulent account openings at Wells Fargo. The letter was written to the heads of the Federal Reserve Board, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Office of the Comptroller of the Currency, National Credit Union Administration, and Securities and Exchange Commission.

In the letter, the representatives requested that the agencies strengthen their proposed rule regarding incentive-based compensation arrangements and said they were "concerned about the excessive level of discretion granted to covered institutions in terms of when the institution must exercise a 'clawback' provision" to "trigger when the institution would withhold, reduce or recoup senior executive bonus pay."

Senators request Labor Department investigation of Wells Fargo

This story appeared in Bank Digest.

Senators Elizabeth Warren (D-Mass), Sherrod Brown (D-Ohio), Jack Reed (D-RI), Robert Menendez (D-NJ), Bernard Sanders (I-Vt), Jeff Merkley (D-Ore), Kirsten Gillibrand (D-NY), and Mazie Hirono (D-Hawaii) have written to Labor Secretary Tom Perez and Wage and Hour Division Administrator David Weil requesting that the Labor Department investigate whether Wells Fargo violated the Fair Labor Standards Act with respect to its account executives, bank tellers, branch managers, and customer service representatives. Wells Fargo recently agreed to a $185 million settlement with federal regulators and the City and County of Los Angeles over the creation of more than 2 million deposit and credit card accounts that may not have been authorized by customers.

 According to the senators, any investigation into Wells Fargo's potential FLSA violations "should include a comprehensive inquiry into whether Wells Fargo aggressively skirted overtime laws--failing to pay overtime to bank tellers and associates who stayed late or came in on weekends to meet their sales quotas, or misclassifying salaried bank associates as overtime-exempt to avoid paying the overtime guaranteed to them by the FLSA.”

Fed approves proposed rule on incentive-based compensation

This story appeared in Bank Digest.

The Federal Reserve Board has approved a joint agency proposed rulemaking that would implement the incentive compensation provisions of Section 956 of the Dodd-Frank Act. Section 956 requires the Fed, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, National Credit Union Administration, and Securities and Exchange Commission to prohibit certain types of incentive-based compensation arrangements and to require the disclosure of information on incentive-based compensation arrangements to the appropriate federal regulator. The agencies will jointly publish the proposed rule, which replaces a never-acted-upon 2011 proposal.

The preamble and regulatory text approved by the Fed are available on the agency's website, but the Fed said it would delay publication of this material in the Federal Register to allow all of the agencies to consider the proposal. Comments are due by July 22, 2016.

Agencies seek comments on incentive-based compensation

This story appeared in Bank Digest.

At its April 26, 2016, meeting, the Federal Deposit Insurance Corporation board of directors approved a proposed rulemaking that would implement Section 956 of the Dodd-Frank Act, which requires the FDIC, Office of the Comptroller of the Currency, Federal Reserve Board, Securities and Exchange Commission, Federal Housing Finance Agency, and National Credit Union Administration to prohibit certain types of incentive-based payment arrangements.

The proposed rule, which replaces a never-acted-upon 2011 proposal, will be jointly published by the agencies. The NCUA approved the proposed rule at its April 21, 2016, meeting. Comments on the proposed rule are due by July 22, 2016.

Under the proposed rule, all covered institutions would be prohibited from offering any incentive-based compensation arrangements that would "encourage inappropriate risks" by providing a "covered person" with compensation that is "excessive" or "could lead to material financial loss" to the covered institution.

• Press Release
• Staff Memorandum
• Statement by FDIC Chairman Martin J. Gruenberg

Obama signs legislation capping salaries of Fannie Mae, Freddie Mac CEOs

This story appeared in Bank Digest.

President Barack Obama has signed the Equity in Government Compensation Act of 2015 (S. 2036), which suspends the recently announced $4 million a year compensation packages for the CEOs at Fannie Mae and Freddie Mac and limits their total compensation to the prior level of $600,000 a year each. Representative Ed Royce (R-Calif) introduced the House version of the bill (H.R. 2243), and Sen. David Vitter (R-La) authored the Senate version of the bill that passed the Senate by unanimous consent on Sept. 15, 2015.

• Royce press release
• White House press secretary statement

Representatives call for implementation of Median Worker Pay Ratio Rule

This story appeared in Bank Digest.

Congressional Progressive Caucus Co-Chairs Reps. Raúl Grijalva (D-Ariz) and Keith Ellison (D-Minn) joined Financial Services Committee Ranking Member Maxine Waters (D-Calif) in calling on the Securities and Exchange Commission to finalize its rule requiring publicly-traded corporations to publicly disclose the ratio of the compensation of their CEO to the compensation of their median worker.

The three lawmakers urged completion of the so-called "Median Worker Pay Ratio Rule" via a letter sent to SEC Chair Mary Jo White. This rule would implement section 953(b) of the Dodd-Frank Act. Their letter was signed by a total of 55 representatives.

Senator questions Treasury's decision to relax GM's executive pay limits

This story appeared in Bank Digest.

In a letter to Treasury Secretary Jacob Lew, Sen. Dean Heller (R-Nev) questioned the Treasury Department's past decision to relax executive pay limits for General Motors' top 25 employees despite recent problems at the company with recalled vehicles. Dean, who has been investigating GM's past failures to recall millions of vehicles due to safety issues, expressed concern that the federal government was rewarding a select number of company executives while "GM's negligence resulted in millions of defective cars being left on the road."

Dean wrote that this is "just another sad example of how out of touch officials in Washington, DC are with the American public."

Report finds Treasury loosened executive pay limits for GM, Ally employees

This story appeared in Bank Digest.

The Office of the Special Inspector General for the Troubled Asset Relief Program has published a report titled "Treasury Significantly Loosened Executive Pay Limits Resulting in Excessive Pay for Top 25 Employees at GM and Ally (GMAC) When the Companies Were Not Repaying TARP in Full and Taxpayers Were Suffering Billions of Dollars in Losses." The SIGTARP report discusses the Treasury's executive compensation decisions for the top 25 employees for General Motors Corporation and General Motors Acceptance Corp.