House approves bill limiting compensation at bailout companies Steve Czajkowski at 9:07 AM ET
[JURIST] The US House of Representatives [official website] approved a bill [H.R. 1664 materials] Wednesday which allows the Treasury Department [official website] to ban certain types of compensation at companies which receive federal bailout money from the Troubled Asset Relief Program (TARP). The Pay for Performance Act of 2009, which was originally introduced by Rep. Alan Grayson (D-FL) [official website], gives Treasury Secretary Timothy Geithner [official profile] the authority to define compensation that is unreasonable and excessive and to bar such payments, along with the power to prohibit payments that are not based on performance standards. The bill passed by a vote of 247-171 [roll call vote] with 12 not voting. While the legislation applies to all employees and not just executives, an amendment to the bill exempts most community banks [MarketWatch report] from the pay restrictions.
The bill comes just weeks after the House passed [JURIST report] legislation [H.R. 1586 text, PDF] that would tax bonuses given to employees of companies that received money from government stimulus programs at 90 percent. The bill was drafted and voted on in reaction to large bonus payments made to employees of embattled insurance company American International Group (AIG) [corporate website]. The strong reaction to exorbitant executive compensation and bonuses comes as the US government and the Obama administration attempt to grapple with the ongoing global financial crisis [JURIST news archive]. Attempts to gain control over the roiling credit markets and possible widespread bank insolvencies have included the passage in September of a $700 billion financial rescue bill [JURIST report], creating the TARP, which provided economic assistance to at-risk financial institutions.
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