HR-9490-119
Referred to the House Committee on Financial Services.
Sponsored by Rashida Tlaib (D-MI)
What it does
This bill would require financial institutions with more than $1 billion in consolidated assets to defer at least 50% of the compensation that exceeds seven times the median employee's pay for "senior employees" (executives, employees earning over $1 million annually, and top risk-takers). The deferred amounts would be held in a fund for up to 8 years (depending on institution size) and used first to pay any civil or criminal fines levied against the institution, and second to make depositors whole if the institution fails — before any federal deposit insurance funds are tapped. Any deferred compensation not needed for fines or depositor protection would be returned to the employee at the end of the deferral period; amounts that cannot be repaid due to insufficient funds would be permanently cancelled.
Who benefits
Bank depositors, who would have an additional layer of protection before federal insurance funds are used in a bank failure. Taxpayers, who would be less exposed to losses from the Deposit Insurance Fund or the National Credit Union Share Insurance Fund. Median-wage bank employees, whose compensation ratio to executives is used as the benchmark. Communities affected by bank failures or financial misconduct. Competing smaller financial institutions (under $1 billion in assets) that are exempt from the requirements.
Who is hurt
Senior executives and high-earning employees at large financial institutions, who would have a significant portion of their compensation withheld for years and potentially cancelled. Financial institutions that may face higher costs recruiting and retaining top talent if deferred compensation is seen as less certain. Shareholders, who may see institutions pass compliance costs through reduced returns or higher fees. Subsidiaries of large institutions, which are covered even if they are small on their own. Former employees whose deferred funds could still be used to pay fines for misconduct that occurred during their tenure.
Supporters argue
Supporters argue that misaligned executive pay structures were a documented contributor to the 2008 financial crisis and the 2023 Silicon Valley Bank failure, where executives collected millions in bonuses while their institutions took on unsustainable risks. They contend that requiring executives to have "skin in the game" through multi-year deferred compensation — which can be cancelled if the institution incurs fines or fails — directly aligns personal financial incentives with long-term institutional stability, reducing the moral hazard that currently allows executives to profit from short-term risk-taking while losses are borne by depositors and taxpayers.
Opponents argue
Opponents argue that the bill imposes a blunt, one-size-fits-all compensation structure that could make U.S. financial institutions less competitive in attracting talent compared to foreign banks and non-bank financial firms not subject to the same rules. They contend that holding former employees' deferred pay at risk for misconduct they had no part in raises serious due process concerns under the Fifth Amendment, and that delegating the specific deferral period for smaller institutions entirely to regulators — with no statutory floor or ceiling — may run afoul of the major questions doctrine and nondelegation principles given the vast economic significance of compensation rules across the financial sector.
Constitutional context
Congress has broad authority to regulate large financial institutions under the Commerce Clause (Art. I, §8, cl. 3), as banking and securities activity is quintessentially interstate commerce under Wickard v. Filburn (1942). However, the bill's broad delegation of rulemaking authority to six separate agencies — including open-ended discretion over deferral periods for smaller institutions — could face scrutiny under the major questions doctrine (West Virginia v. EPA, 2022) and post-Loper Bright independent judicial review (2024), particularly if agencies issue rules of vast economic significance beyond what the statutory text clearly authorizes. The cancellation of deferred compensation already earned may also raise a Due Process or Takings Clause question under the Fifth Amendment.
Checks and balances
Congress sets the compensation deferral framework; six federal financial regulators (the Fed, OCC, FDIC, FHFA, NCUA, and SEC) gain rulemaking authority to implement it within their respective jurisdictions; courts would review agency rules under the post-Chevron independent judgment standard established in Loper Bright (2024).
Historical precedent
Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) directed federal regulators to jointly issue rules prohibiting incentive-based compensation arrangements that encourage inappropriate risk-taking at large financial institutions, but those rules were never finalized, leaving the underlying statutory mandate unimplemented for over a decade.