“‘You owe your customers and the public an explanation for the decisions that resulted in the costly failure of your bank.’”
That’s from a letter Massachusetts Sen. Elizabeth Warren sent to First Republic Bank’s former CEO Michael J. Roffler on Thursday. First Republic Bank collapsed this week. It was the second largest bank failure in U.S. history and the fourth U.S. bank to fail this year — federal regulators later sold it to JPMorgan Chase
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A rapid rise in interest rates, a large amount of uninsured deposits and a first-quarter update that revealed weaknesses in its business all were factors in the demise of First Republic Bank, MarketWatch’s Steve Gelsi notes. Warren’s letter pointed to lucrative salaries and bonuses that Roffler and other bank executives earned prior to the bank’s failure as a prime example of “gross mismanagement.” Warren is generally viewed as a critic of big banks and routinely calls for major banking regulation reform. She also criticized the fact that JPMorgan Chase was the bank selected to take over First Republic in a recent CNN interview: “Let somebody else buy this bank. Let somebody else take over those assets.”
Roffler earned $900,000 in base salary and a maximum annual incentive bonus of $2.95 million for 2022, First Republic’s proxy statement filed on May 22 stated. See also: ‘We are running out of time to fix this problem’ — Bill Ackman’s latest warning on regional banks But Warren is not the only lawmaker searching for answers over the banking turmoil in the U.S. Tim Scott (R-S.C.), Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, a group Warren is a member of, released a statement on Thursday that advocated for more accountability in the banking sector. “We should, 100 percent, discuss certain authorities regulators have to claw-back executives’ compensation if that individual acted in malpractice. And we should discuss the lack of accountability at the executive and board of director level, as well. But we should not forget that the regulators should also be held accountable,” Scott said. The Wall Street Journal also reported that some First Republic Bank executives sold $12 Million in the company’s stock in the months leading up to the bank’s crash. See also: Americans have gloomy view about the future with 71% predicting the U.S. will be ‘less important’ by 2050 Executives at the now-defunct Silicon Valley Bank also paid some of its leaders handsomely prior to its collapse. Former CEO Greg Becker and CFO Dan Beck had their compensation grow by 30% since 2018. In addition, hours before the bank was closed in March, SVB paid bonuses to managing directors, per media reports, wh …
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