2nd UPDATE:US House Begins Debate On Second Executive Compensation Bill
April 01 2009 - 3:14PM
Dow Jones News
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