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Markup of S. 1271, FEND Off Fentanyl Act and the RECOUP Act

Senate Banking, Housing, and Urban Affairs Committee

Markup of S. 1271, FEND Off Fentanyl Act and the RECOUP Act

Wednesday, June 21st, 2023

Topline

  • The committee marked up and reported two pieces of legislation favorably to the Senate.
  • The FEND Off Fentanyl Act was voted up unanimously, while the RECOUP Act received two nay votes from Senators Tillis and Haggerty.

Legislation

Opening Statements

Chairman Sherrod Brown (D-OH)

In his opening statement, Brown highlighted the bipartisan nature of both measures being considered by the committee. He lauded that the bills would make communities safer, with the FEND Off Fentanyl Act keeping dangerous fentanyl from entering our neighborhoods and would increase fairness in the economy by punishing bank executives for their failures. Speaking to the bipartisan nature of the FEND Off Fentanyl Act, Brown said that nearly every committee member had cosponsored the legislation and that 60 Senators have cosponsored the bill in addition to various private organizations outside Congress. Brown noted that Fentanyl accounted for 80% of Ohio’s accidental drug overdoses and that the bill would prevent these deaths by targeting foreign fentanyl supply chains in Mexico, China, and elsewhere using the economic tools available. He then shifted to speak about RECOUP, saying it is the Committee’s response to bank failures, where managers took risky bets with the deposits of everyday Americans. Brown continued saying American workers and their families should not have to foot the bill because those bets did not pay off. Brown said that bank executives can not get away with their failures, avoiding consequences and enjoying their large bonuses. He said the bill will force executives to face real accountability and finished by saying that bank managers who take on too much risk and watch their banks fail as a result should not be allowed to keep the profits they made and take their bad behavior to the next bank.

 

Ranking Member Tim Scott (R-SC.)

In his opening statement, Scott spoke to the fact that 70,000 Americans lost their lives to fentanyl in the last year alone, making the FEND Off Fentanyl Act that much more important in this moment. Scott also noted that this was the first markup on the Senate Banking Committee since 2019. He emphasized that a return to regular order is needed on the Committee. Scott went on to say the FEND Off Fentanyl Act will cut off funding to fentanyl precursor suppliers in China and Mexico and admonished the Biden Administration’s southern border policies as a contributing factor to the current crisis. He then said that fentanyl and other substances are being trafficked through the southern border and the Biden Administration’s refusal to close it has exacerbated the entrance of fentanyl into the United States. Scott said the bill would save thousands of lives and target fentanyl precursor suppliers’ profits. Moving on to the RECOUP Act, Scott explained the bill would not have taxpayers holding the bag when bank managers’ risky business practices cause a failure. He went on to say that while bank managers’ bad practices were a large factor in recent bank failures, the high inflation environment created by the Biden Administration’s policies were also to blame. The bill would ensure that bank managers face consequences going forward, not allowing executives to pay themselves huge bonuses just before a failure by giving the FDIC the ability to claw back executive compensation. Scott also promoted the Manager’s Amendment which he said would increase transparency with banking regulators to prevent them from “falling asleep at the wheel.”

 

Consideration of Legislation

1271, The Fentanyl Eradication and Narcotics Deterrence (FEND) Off Fentanyl Act

Brown introduced the legislation and proposed Brown-Scott amendment 1, a substitute amendment to make technical changes to the bill which was adopted with no objection. Next Brown called up amendment number 2, a manager’s amendment which includes modified Menedez amendment 6 and Daines amendment 9 within the amendment. There was an objection, but it was voted through.

 

Senator Daine’s (R-MT) spoke to the amendment saying general licensing practices which often allow regimes to seek exemptions from sanctions and said his amendment 9 would require Senate approval for any exemptions. Daines did not offer his amendment.

 

Senator Warnock (D-GA) proposed his amendment 12, which would broaden the ability to use funds in the act for not just law enforcement but for mental health and rehabilitation if the localities so choose. He said that it is important the U.S. should take a holistic approach to curb the use of drugs in the first place. Warnock then withdrew the amendment and said he would like to work with the committee on making changes as the bill progresses through the Senate.

 

The bill was agreed to by voice vote, as amended, and was reported favorably to the Senate by a unanimous vote, 23-0.

 

The Recovering Executive Compensation Obtained from Unaccountable Practices (RECOUP)

Brown introduced the legislation and called up amendment 2, a manager’s amendment by Scott and Brown, and includes amendments Brown 3, Scott 4 as modified, Lummis-Smith 5, Vance 9 as modified, Kennedy 14 as modified, Reed 17 as modified, Tillis 34 as modified, and Sinema-Tillis-Lummis 36 as modified. The amendment was agreed to unanimously.

 

Senator Tillis (R-NC) announced he would withdraw amendments 31-33 while 34 was adopted into the manager’s amendment. Tillis cautioned the committee that while management malpractice led to recent bank failures, supervisory malpractice contributed as well. Tillis said the bill is too expensive and does not make a big enough distinction between management malpractice and management bad decisions. The lack of distinction could stifle innovation and hurt the industry.

 

Senator Sinema (I-AZ) thanked the Chairman and Ranking member, and expressed her satisfaction with the inclusion of Sinema-Tillis-Lummis amendment which will help hold the federal reserve accountable.

 

Senator Vance (R-OH) spoke to the importance of the United States regional banking system and explained that that system is currently under threat with deposits migrating to larger banks. Vance noted that the burden of heavy regulation falls hardest on smaller banks. He explained that his amendment would ensure that if a bank falls into receivership with the FDIC, a large bank would only be able to purchase its assets if there are no other offers on the table. He finished by saying U.S. should prevent consolidation in the banking industry and promote the regional banking system.

 

Senator Reed (D-RI) spoke to his amendment 18, which would broaden which directors fall under the claw back purview to all directors and said that SVB only had one director internal to the bank, but 10 elsewhere. He said he’s like to work with leadership on ensuring these directors are help accountable.

 

Senator Haggerty (R-TN) said that the U.S. must protect capital markets by ensuring that banking supervisors are doing their jobs. He emphasized the importance of creating regulatory certainty to help grow the economy and maintain our competitiveness. Haggerty then proposed and withdrew amendments 21, 22, and 23.

 

Senator Smith (D-MN) brought attention to the fact that regulatory deficiencies and supervisory failures contributed to bank failures. She went on to say that public reports will help to increase transparency among regulators and thanked the Chair for including her amendment in the Manager’s amendment.

 

Senator Lummis (R-WY) brought up amendment 7 and spoke to how the FDIC has very few interactions with the banks before the point of dissolution. Her amendment would’ve required that the FDIC work with the regulators directly involved with these banks during a consultation period of 14 days before dissolving the banks. She said she would not offer it due to the agreement reached, but that she hopes it could be included in future conversations.

 

Senator Warren (D-MA) applauded the committee for passing the FEND Off Fentanyl Act but said there was more work to be done to cut off the money supply to Fentanyl suppliers by stopping money laundering through crypto. She moved onto the RECOUP act saying that the banking system must work for all its stakeholders and not just the extremely wealthy. Warren said the banking system rewarded the risk taking that led to the recent bank failures and thanked the bipartisan coalition behind the bill she had proposed with Senator Hawley. Warren then spoke about how executive compensation claw back should affect all bad actors, ensuring that years of bad behavior in the lead up to a failure are punished as well. She finished by saying that Congress must stand up to lobbyists and lawyers that create small exceptions to every rule and said that RECOUP was a good compromise and should be supported by the committee and the entirety of Congress.

 

Senator Kennedy (R-LA) proposed an amendment that would index the 10-billion-dollar threshold for compensation claw backs to inflation, and another amendment regarding foreign executive trade reporting. Kennedy noted that in the U.S. executives have two days to electronically report a trade to the SEC, while foreign insiders have 30 days and can elect to do it by mail which often leads to those trades never getting posted. Kennedy asked for help in exploring these two ideas in the future and withdrew his amendments. Senator Van Hollen (D-MD) spoke in support of the latter amendment, hitting on the importance of making sure foreign firms and executives play by the same rules. Senator Kennedy then mentioned right before the end of the hearing that fentanyl quantities that would impose minimum sentencing guidelines should be reduced to fit more in line with how other illicit drugs are counted.

 

Senator Daines called up amendment 35 which would increase transparency of the distribution and timeliness of CDFI funds. Daines noted that CDFI funds have led to great investments, but said the program has no transparency and needs additional oversight from Congress to ensure potential recipients receive notifications on their applications in a timely manner. Daines then withdrew the amendment.

 

The RECOUP Act was agreed to by voice vote, as amended, and was reported favorably to the Senate by a vote of 21-2 with only Tillis and Haggerty voting nay.

 

For more information on this meeting, please click here.

For an archive of past SIFMA hearing coverage, please click here.