H.R. 1664 is expected to be considered on the House floor on
Wednesday, April 1, 2009, under a structured rule, allowing for one
motion to recommit, with or without instructions. This legislation was
introduced by Alan Grayson (D-FL) on March 23, 2009, and referred to
the Committee on Financial Services, which reported the bill on March
26, 2009, by a vote of 38-22.

H.R. 1664 would impose compensation restrictions on employees of any
entity that has an outstanding direct capital investment from the
Troubled Asset Relief Program (TARP), as well as employees of Fannie
Mae, Freddie Mac, and the Federal Home Loan Banks. The bill would
prohibit any qualifying institution from making a compensation payment
to an employee if it provides "unreasonable or excessive" compensation
or includes a bonus that is not performance based. The bill would
require the Secretary of Treasury to establish the definition of
"unreasonable and excessive" compensation within 30 days of enactment
and, thus, determine the level of compensation an employee of a TARP
recipient could earn.

H.R. 1664 would also require the Secretary
to establish standards for performance-based compensation. An
institution with outstanding TARP funds would be required to apply
these standards before it paid a bonus to any employee. The bill would
require any financial institution that has received TARP funds to issue
a report within 90 days of enactment (and annually thereafter) stating
how many employees received total compensation above $500,000.

Finally,
the bill would effectively repeal an amendment to the Emergency
Economic Stabilization Act (EESA) added by Sen. Chris Dodd (D-CT)
during the conference committee on the so-called "stimulus" bill, H.R.
1. The amendment stated that provisions limiting bonus compensation
payments would not apply to "any bonus payment required to be paid
pursuant to a written employment contract executed on or before
February 11, 2009." H.R. 1664 would state that the exception for bonus
contracted before February 11, 2009, would not apply while TARP capital
to the institution is still outstanding.

On
October 3, 2008, the House passed H.R. 1424, the Emergency Economic
Stabilization Act, which established the $700 billion Troubled Asset
Relief Program (TARP) to authorize the government to purchase toxic
assets from financial instaurations.  According to the Government
Accountability Office (GAO), the Department of Treasury has allocated
some $590.4 billion of TARP funds to more than 530 companies through 12
different programs.  H.R. 1664 would require the Secretary of Treasury
to prohibit "unreasonable or excessive" levels of compensation for
institutions that have received TARP funds and have yet to pay the
funds back.

The underlying legislation was introduced on March
23, 2009, one week after American International Group (AIG) announced
that it had paid $165 million in contractually obligated retention
bonuses-some as large as $6 million-to 73 AIG Financial Products Group
employees even though the company is being kept alive with $173 billion
in taxpayer funds.  The announcement sparked public outrage regarding
the use of taxpayer assistance and led to the consideration of this and
other legislation.

As an initial reaction to the AIG bonuses, the
House passed H.R. 1586, a bill to impose an additional 90% tax on
bonuses received by employees of TARP recipients that owed the
government more than $5 billion, by a vote of 328-93. 
The 90% tax increase would have applied to only the portion of a bonus
that, in combination with other income, increases an employee's
adjusted gross income to a level above $250,000 ($125,000 for married
couples filing individually) in the taxable year when the bonus was
received.  Therefore, employees with adjusted gross incomes of less
than $250,000 (including bonuses) would not be impacted.  H.R. 1586 has
yet to be considered by the Senate.

Unlike the 90% tax, the underlying legislation would require the Secretary to assess compensation restrictions on all employees (not just those making more than $250,000) and would affect all TARP recipients
(not just those that have received more than $5 billion).  H.R. 1664,
the "Pay for Performance Act," would also give sole responsibility for
determining the restrictions on compensation to Treasury Secretary
Timothy Geithner, thus removing any Congressional control over the
limits on pay.

Following debate on H.R. 1, the so-called "stimulus" bill, the Democrat conference committee stripped a
Senate-passed provision which would have prevented the $165 million in
AIG bonuses.  The conference committee removed an amendment sponsored
by Senators Olympia Snowe (R-ME) and Ron Wyden (D-OR) that would have
forced any TARP recipient to repay any bonus paid in excess of
$100,000, or face a 35% excise tax on any TARP funds that were not
immediately paid back to the Treasury.   In fact, the $165 million in
AIG bonuses were made possible by a provision to the "stimulus" added
by Sen. Chris Dodd (D-CT), which stated that provisions limiting
compensation payments would not apply to "any bonus payment required to
be paid pursuant to a written employment contract executed on or before
February 11, 2009."

In the dissenting views that accompany House
Report 111-064, Republicans on the Financial Services Committee point
out that the Minority has been strongly opposed to excessive bonuses
and compensation for executives at companies which have received
taxpayer bailouts-especially at institutions such as AIG, which has
received or been pledged a staggering $173 billion from the taxpayers. 
The dissenting views also note that it was the addition of the Dodd
amendment in the final hours before the vote on H.R. 1 that allowed the
AIG bonuses to occur.  According to the dissenting views, "H.R. 1664 is
an effort to cover the Democratic Majority's tracks, and ‘change the
subject' from the administration's failure to exercise adequate
oversight of the taxpayer dollars expended to prop up AIG."

Some
Members may be concerned that H.R. 1664 further increases the
government's role in the everyday decisions of TARP recipients rather
than moving the federal government toward an exit strategy from the
cycle of bailouts and private-sector entanglements.  In addition,
Members have raised concerns that the legislation is too broadly
applied to small TARP recipients and abdicates too much Congressional
responsibility to the Secretary of Treasury.  In light of these
concerns, Ranking Member Bachus (R-AL) and other Members of the
Financial Services Committee are opposed to the legislation.

According to CBO, H.R. 1664 would have no significant impact on the
federal budget. However, H.R. 1664 would impose a private sector
mandate by restricting the compensation of employees of institutions
that have received TARP funds. Because the cost of the mandate would be
determined by the Secretary of Treasury at a later date, CBO cannot
determine if the private sector mandate would exceed the threshold
established in the Unfunded Mandate Reform Act for private-sector
mandates ($139 million in 2009, adjusted annually for inflation).