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Senate's clawback bill on bank CEO pay was 'remarkable amount of bipartisanship': Reporter

After passing in the Senate Banking Committee, the RECOUP Act — a bill seeking to clawback pay and compensations of failed bank CEOs — has yet to see final approval by House lawmakers. Punchbowl News Financial Services Reporter Brendan Pedersen joins Yahoo Finance Live to highlight the legislation lawmakers are currently reviewing, including abortion and banking reform for cannabis companies.

Video Transcript

- Congress heads back in session next week. Among the issues on the docket-- regulation in the wake of March's bank failures. After a series of hearings, conversations about bank regulation seem to have cooled from earlier this year.

The Fed's recent stress test results are a welcome sign of the system's strength yet some lawmakers argue more oversight is still needed to prevent history from repeating itself. With a look at what's on the agenda, we're joined by Brendan Pede-- Pedersen, financial services reporter at Punchbowl News. So, Brendan, let's get right into this. What can we expect coming up on the docket?

BRENDAN PEDERSEN: Thanks for having me. Yeah, so we just saw the Senate Banking Committee last month pass on very bipartisan lines legislation that would make it easier for regulators to claw back executive pay and also give them new powers to remove executives from the industry for certain reasons and negligence and other conditions. It was a really remarkable amount of bipartisanship on the Senate Banking Committee led by Chair Sherrod Brown. Something like-- every Republican on the committee except for two members agreed to let this thing go and send it ostensibly to the house.

Where that goes next is an open question. I am personally not all that bullish at this time, because the house and its Financial Services Committee Chairman Patrick McHenry has made pretty clear that he doesn't really see the need for this kind of reform. He says pretty openly that look, I will look at any legislation the Senate Banking Committee gives us, but lawmakers are-- regulators already have this authority.

You can claw back as much pay as you want using section 956. I shouldn't say as much as you want but a certain amount of executive pay. That's a rule from Dodd-Frank that has never been implemented. And he has brought that up a lot.

So it's gonna be hard for that Senate Banking package to get through. And we'll be looking for signs of life. But like I said, I'm not exactly bullish.

- How-- how would they go about doing this? And perhaps this is for my own edification, perhaps that for some of our viewers as well. How-- how does that even, that process, even go about happening?

BRENDAN PEDERSEN: Yeah, so typically when a bill passes out of a committee in a chamber of Congress, it gets sent to the sister committee on the other side of the building. The committee has the option to take it up in the house. We-- Patrick McHenry could schedule a markup on that bill or host hearings on that bill to discuss before going up into a markup.

And then theoretically from there, they'd vote on committee, send it through or not. It's interesting, though, with this bill. In theory, like, if-- if Chairman McHenry was feeling like Democratic, he could host a markup. And if his members support it, it could go through. And if not, it would just go away.

In this case, there's a fair amount of bipartisan interest in this kind of reform. And so there's a chance that even if McHenry didn't support it, other Republicans on the committee would. And I'm not sure he wants that. He, as the chairman, has the power to say, you know, I don't really wanna talk about this right now.

There are other ways for Democrats to put legislation on the floor. You might recall during the debt limit discussions, we talked about a discharge petition, which is a time consuming and sort of technical way to get things on the floor without the house's approval. But I do wanna flag the baking industry does have some more meaningful concerns about this bill, as you can maybe imagine, about a law targeting bank executives.

And I think we're gonna see some of those concerns play out from the banking lobby here in the next little amount of time. But like I said, odds are fairly low with house passage.

- So, Brendan, just let's widen out just a little bit in terms of what else is gonna be on the agenda in the week ahead. So there's expected to be a Defense Authorization package coming up more than $800 billion. What's expected to be in that?

BRENDAN PEDERSEN: Yeah, this is gonna be a real battleground. And I think I-- I wanna talk about some reporting that my colleague Andrew Desiderio has been doing on this for a while. We expect the NDAA discussion to be not dominated per se, but there's gonna be a lot of discussion about abortion.

As you probably know, Senator Tommy Tuberville has been-- Tuberville, excuse me, has been-- no, it is Tuberville. I'm sorry. I'm getting back into the flow of things after--

- No worries.

BRENDAN PEDERSEN: --the holiday weekend.

- We all are.

BRENDAN PEDERSEN: Senator Tuberville has been holding up military promotions because he doesn't like the Pentagon's existing abortion policy. This has been getting blowback from certainly Democrats but also a fair number of Republicans, especially in the Senate at this point. And he is using or trying to use NDAA discussions to kind of like hold court on this issue, trying to get the Pentagon to basically blink and adjust their abortion policy so that these promotions can go through.

I don't see a exit from this. He has been very, very stubborn on this issue, despite being asked by colleagues on his side of the aisle to come to the floor and-- and-- or-- or just relent on some of these holds that arguably are affecting national security by preventing our service members from going off and doing their jobs in new places.

We're gonna see more battle over this. We might even see some resistance from house Republicans when the NDAA is being decided. But beyond that, we're gonna just have to wait and see what that markup brings.

- Brandon, just lastly while we have you, we-- we do know that there's a lot of focus as well in terms of the range of issues that are being taken up in Washington right now. There's some focus as well on the cannabis banking as well after their recess. Is this gonna move forward at all? What would this set up for some type of federal legislation, if any?

BRENDAN PEDERSEN: Yeah, you know, cannabis banking, specifically the Safe Banking Act, which is a law that would basically or a bill that would make it easier for regulated financial institutions to work with cannabis firms, I have an old editor who would call this the Lucy's football of Charlie Brown issue because every time it feels like it maybe is going to happen. We get really close to the finish line, and then, hoop, it gets pulled away, and we are back to the drawing board.

This time around, the Senate Banking Committee is interested in taking up cannabis reform when it comes to banks. That's not something that was true, even a couple of years ago when Sherrod Brown was still the committee chair. But this has become more of an issue for Democrats. Cannabis reform is a big issue for Chuck Schumer, and so they just have that as a priority.

We expect them, if not immediately next week, at some point after the current congressional recess, Congress is gonna come back and the Senate is going to think hard about cannabis banking. And they're looking for bipartisan support.

This is an issue that in general does get a lot of Republican support. It's a business friendly issue. There are some public safety elements to cannabis banking reform because the current system allows for a lot of cash to be in the system. The real trick is going to be the house, again.

There is, again, like, just with-- with, like, with clawback reform, there's some real bipartisan support here. But Patrick McHenry does not support cannabis banking on his own. He has said he will not get in the way of it, however.

So there is some room here for compromise. But it's hard for me to say exactly what the house package is gonna be looking like because in the house, you actually mentioned the NDAA, either sort of related tangent the-- the top Republican in-- the house who's working on cannabis banking is David Joyce of Ohio. His top issue-- top issue has been Homeland Security funding and appropriations process right now.

I ask him basically every week, like, hey, how's cannabis banking reform going in the house? And he said to me a couple times, like, I got my own stuff I'm worrying about right now. We'll get to it when we get to it. So the house's attitude is a little bit lackadaisical on this particular point. I think we'll see some movement, but we haven't seen evidence of that just yet.

- Interesting. All right. Brendan Pedersen, financial services reporter at Punchbowl News. Thanks so much for joining us and breaking down some of the conversations you're having over at the Hill too.