Washington, DC - The Financial Services
Committee today passed H.R. 1664, the Grayson-Himes Pay for Performance
Act of 2009, that would prohibit certain compensation payments by
companies that have received direct capital investments under the TARP
program and the Housing and Economic Recovery Act until these
investments are repaid. Specifically, the bill prohibits any
compensation payments that are unreasonable or excessive, restricts all
non-performance based bonuses, and effectively repeals a controversial
provision in the American Recovery and Reinvestment Act. The Committee
passed the legislation by a vote of 38-22.
“This bill is based on two simple concepts. One, no one has the
right to get rich off taxpayer money. And two, no one should get rich
off abject failure,” said Congressman Alan Grayson (D-FL). “An economy
in which a bank executive can line his own pocket by destroying his
company with risky bets is an economy that will spiral downwards. And
a government that hands out money to such executives is a government
that fails to protect the taxpayers.”
“Given the legislative process and the Administration’s desire to
get this bill done before the recess to speed funds into the economy,
Congress made a mistake. We have, fortunately, a process for correcting
mistakes which is subsequent legislation. We have now acted very
promptly and if this bill passes the House and the Senate then the
mistake will have had no effect,” said Chairman Frank.
“We need regulation that aligns the public’s interest with the
health of financial institutions,” said Congressman Jim Himes (D-CT).
“This responsible legislation will help ensure accountability for
taxpayers and shareholders and encourage good performance while keeping
employee pay a matter of measurable job performance rather than public
opinion.”
The bill adds new compensation/bonus restrictions to the Emergency
Economic Stabilization Act for financial institutions that receive or
have received a direct capital investment by the Treasury Department
under the Troubled Asset Relief Program or the Housing and Economic
Recovery Act (which covers Fannie Mae, Freddie Mac and the Federal Home
Loan Banks). While such a capital investment is outstanding, and
regardless of when a compensation payment arrangement was entered into,
recipients of a direct capital investment from the Treasury would be prohibited from:
- Paying any executive or employee any compensation that is
“unreasonable or excessive,” as defined in standards established by the
Treasury Secretary.
- Paying any bonus or other supplemental payment that is not directly
based on performance-based standards set by the Treasury Secretary.
The bill would require the Treasury Secretary to consult with the
Chairperson of the Congressional Oversight Panel and obtain approval of
the agencies that are members of the Federal Financial Institutions
Examination Council before defining unreasonable or excessive
compensation and establishing performance-based measures.
The bill also would provide that the restrictions on bonuses of
highly-compensated employees, adopted in the American Recovery and
Reinvestment Act, would apply while a direct capital investment under
TARP remains outstanding, regardless of when the arrangement to pay
such bonus was entered into. This provision is intended to effectively
repeal a provision that currently exempts from the prohibition’s
coverage bonuses that are due under employment contracts entered on or
before February 11, 2009.
Finally, the bill would require a financial institution that is
subject to the new compensation requirements to submit an annual report
to the Treasury Secretary stating how many executives and employees
received or will receive total compensation above specified dollar
amounts during the fiscal year.
The legislation is now being forwarded to the full House for consideration, which could come as early as next week.
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