The House of Representatives voted 247-171 Wednesday to give the Treasury Department the power to restrict bonuses and compensation at companies receiving Federal Reserve bailout money.
The Pay for Performance Act of 2009 would prohibit the companies paying all employees, not just executives, unreasonable or excessive compensation until the bailout money is paid back, a measure that could replace an earlier effort to heavily tax executive bonuses.
The standards also would cover compensation paid to an employee after leaving a firm or before joining it. However, community banks that receive less than USD 250 million in government funds have been exempted.
The bill, sponsored by Barney Frank, chairman of the powerful House Financial Services Committee, empowers Treasury Secretary Timothy Geithner to define what constitutes reasonable compensation, as well as to ban bonuses not based on performance standards.
The Treasury Secretary's guidelines would apply to companies receiving assistance from the government's Troubled Asset Relief Program, or TARP.
Ten Republicans joined 237 Democrats in providing heavy support for the bill, with only eight from the Democratic Party voting against the measure.
The new measure came two weeks after the House passed legislation taxing bonuses for persons with incomes over USD 250,000 at a 90 percent rate besides taxing individuals on any bonuses received since January 1 2009 from companies getting USD 5 billion or more in money from the TARP. However, the measure has failed to clear the Senate after President Barack Obama and Senate Republicans expressed concerns about going that far.
The new measure was in response to public outrage following the recent revelation that insurer American International Group, Inc. (AIG.N), which posted multi-billion-dollar losses, doled out USD 165 million in bonuses even as it received more than USD 170 billion of taxpayer money in federal bailouts, plus a USD 85 billion loan from the Federal Reserve.
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