The House of Representatives could vote as early as next week on a new bill designed to limit excessive executive compensation at banks that have received government bailout funds. House Financial Services Committee on Thursday sent the Grayson-Himes Pay for Performance Act of 2009, which will add new compensation and bonus restrictions to the Troubled Asset Relief Program, to the full chamber for a vote. The measure comes a little more than a week after the House passed legislation that would punitively tax employees of bailed-out companies, after a public furor arose over $165 million in bonus payments made to executives at teetering insurance giant American International Group ( AIG). Under the new bill, banks that have received TARP money may not pay any executive or employee compensation deemed "unreasonable or excessive" by the Treasury Secretary or pay any bonus or other supplemental payment that is not directly performance-based, until the TARP money is paid back. The bill also says that restrictions on bonuses of highly-compensated employees, established in the stimulus legislation passed last month, would apply while a financial institution is under TARP regardless of when the arrangement to pay such a bonus was made. The provision is meant to repeal a provision of the stimulus law that currently exempts bonuses due under employment contracts entered on or before Feb. 11. The House on March 19 overwhelmingly passed legislation that would retroactively tax bonus payments up to 90% to the employees making more than $250,000 at companies that have received more than $5 billion from TARP. The measure came after it was discovered that AIG made over roughly $165 million in bonus payments to employees, even as the troubled insurance firm accepted more than $170 billion in bailout funds.
A Senate version of the bill has stalled until at least next week, and President Barack Obama has indicated he believed the tax could be unconstitutional. Analysts also have criticized the House bill, saying the measure is misguided and could have unintended consequences. Banks are taking pro-active measures to oppose the AIG-inspired bill. JPMorgan Chase ( JPM) is urging former Washington Mutual employees to oppose the legislative proposal by telling them to communicate with their legislators, particularly ones located in Washington state, according to media reports. Certain employees were given sign-on bonuses to remain at the company after the New York-based company acquired WaMu for $1.9 billion in September after it was seized by regulators.