The U.S. House of Representatives on Wednesday began debate on a measure that attempts to limit the compensation of executives at firms receiving funds from the Treasury Department's Troubled Asset Relief Program, marking a second and less aggressive move by House lawmakers to curb controversial bonuses.

The bill, approved last week by the House Financial Services Committee, wouldn't allow firms receiving funds from the Treasury program, known as TARP, to make payments to executives that are "unreasonable or excessive" as part of a new or existing compensation package. The House approved a procedural motion allowing debate of the bill by a 236-175 vote and will have a final vote on the legislation Wednesday evening.

The bill follows public outrage after the American International Group Inc. (AIG) paid $165 million in bonuses to top employees and executives after receiving public funds through a $173 billion bailout.

"We will not sit idly by as money is being taken from the American people instead of being used to restore the confidence in this nation as it was intended," said Rep. Michael Arcuri, D-N.Y.

The measure also requires that bonuses and other "supplemental payments" are awarded based on performance standards set by federal regulators. The Treasury Department would develop the standards with the approval of the interagency Federal Financial Institutions Examination Council and the TARP Congressional Oversight Panel.

Debate on the bill comes after the House on March 19 overwhelmingly passed a bill that would slap a 90% tax on bonuses for people that make $250,000 or more at firms receiving TARP funds. That measure, which was approved in the House Ways and Means Committee, saw little traction in the Senate, and it is unclear if the bill approved by the Financial Services panel will have better prospects.

But the bill debated Wednesday would sidestep questions of constitutionality raised by the legislation already passed in the House. It also gives the Treasury far greater discretion in deciding which bonuses are excessive.

Still, the bill was criticized by House Republicans, who complained it was politically motivated and would do little to solve the nation's financial crisis.

"Maybe it's worth it to pay people high salaries to turn around the financial institutions, which have a ripple effect throughout our housing and our credit system and our banking system," said Rep. Jack Kingston, R-Ga.

The House will consider several amendments to the bill, including one offered by House Financial Services Committee Chairman Barney Frank, D-Mass., that would clarify that firms that do business with TARP-recipient firms wouldn't be subject to the compensation limits in the bill. The amendment also would exempt severance pay from the proposed limits, as long as the employee receiving severance pay have been with their firm for five years and are not receiving a payment greater than their annual salary or $250,000.

The bill is one of several efforts that have materialized this year to curb compensation for firms receiving TARP funds. President Barack Obama put in place executive compensation limits in early February limiting annual compensation at TARP-recipient firms to $500,000 and signed into law other executive compensation limits approved by Congress as part of a $787 billion economic stimulus package.

The House didn't approve a bill sponsored by House Judiciary Chairman John Conyers, D-Mich., that would allow the U.S. Department of Justice to claw back bonuses paid to executives at firms that received federal aid under TARP and other programs. Many lawmakers, including some Democrats, had expressed concerns about the consitutionality of the measure.

Though the House voted 223-196 in favor of the bill, it was considered under rules that require a two-thirds majority for passage, and therefore failed.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; patrick.yoest@dowjones.com