Mere hours before the federal government seized it, Silicon Valley Bank paid out employee bonuses. In response, a bipartisan group of lawmakers have introduced legislation to recoup funds from bank executives in the event of future failures.

While the timing appeared suspicious, the SVB bonuses were a part of employees’ annual payout and planned in advance of the bank’s collapse. But paired with CEO Greg Becker cashing out $3.6 million in shares of SVB less than two weeks prior to the failure, these actions caught the attention of Washington politicians.

“It’s outrageous that these people took bonuses and sold stock in the days leading up to the bank’s failure,” Sen. Kyrsten Sinema, I-Ariz., said during a banking committee hearing featuring regulators on March 28. “We should hold these executives accountable for the fullest extent of the law and claw back those bonuses and stock sales.”

Federal regulators immediately terminated bank leadership in the wake of the collapse, but they had a cushion to fall back on. Executives and directors at SVB cashed $84 million worth of SVB stock over the past two years as the bank’s profits soared, according to Smart Insider. That’s in addition to the millions paid in executive salaries each year.

“When banks fail because of mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again,” the White House said in a statement a week after SVB failed.

In various forms, Congress has answered the call. A bipartisan group of senators headlined by Sen. Elizabeth Warren, D-Mass., introduced “The Failed Bank Executives Clawback Act of 2023” on March 29. The bill would “claw back from bank executives all or part of the compensation they received over the five-year period preceding a bank’s insolvency or FDIC-resolution.” Republican Sens. Josh Hawley, R-Mo., and Mike Braun, R-Ind., are also co-sponsors.

Warren said the legislation would incentivize executives to act more cautiously.

“If you load this bank up on risk and the bank explodes, you’re going to lose that fancy bonus, you’re going to lose that big salary, you’re going to lose those stock options,” Warren said in an interview with CNBC on Friday, March 31.

Michael Barr, vice chair of supervision at the Federal Reserve, told senators during the week of March 26 that regulators already have some authority to hold executives accountable. He said the consequences could include a prohibition from banking, civil penalties or payment as part of restitution.

Saving depositors from SVB’s failure cost the Federal Deposit Insurance Corporation’s deposit insurance fund $20 billion. The fund will eventually be replenished through a special fee on banks. FDIC Chair Martin Gruenberg told the Senate Banking Committee that giving the FDIC explicit clawback authority “probably would have some value.”

Separate but similar legislation has been introduced in the House of Representatives as well. Despite the bipartisanship in introducing these types of bills, Congress has struggled to cross this finish line in the past.

Following the 2008 financial crisis, the House passed a bill by the wide margin of 328 to 93 that would have imposed a heavy tax on bonuses of high-earning employees at companies that were bailed out by the federal government. The legislation later stalled in the Senate.

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