- The Washington Times - Saturday, August 1, 2009

The House of Representatives on Friday overwhelmingly passed a bill aimed at curbing Wall Street pay packages that have stoked public outrage during the worst recession since the 1930s.

The bill, crafted by House Democrats, would give federal regulators the authority to cap pay incentives that they deem would encourage bankers and other financial executives to take risks that could threaten the economy or viability of their companies.

The measure includes an Obama administration-backed “say-on-pay” provision that would give company shareholders annual, nonbinding votes on top executives’ compensation, including lucrative arrangements such as “golden parachutes.”

Supporters of the bill, which passed by a vote of 237-185, say that excessive executive compensation practices have led to reckless risk-taking on Wall Street and contributed to the recent global credit crisis.

Financial Services Committee Chairman Barney Frank, who sponsored the bill, called it “an important step toward the comprehensive financial reform we need.”

“The question of compensation amounts will now be in the hands of shareholders and the question of systemic risk will be in the hands of the government,” the Massachusetts Democrat said.

Treasury Secretary Timothy F. Geithner applauded the House’s action, saying the bill would “help ensure that pay encourages long-term performance, not excessive risk-taking.”

Republicans fought the measure, saying it would give “unprecedented authority to unelected Washington bureaucrats.”

“The sweeping compensation mandates in the bill, which were not subject to any committee review prior to its consideration, will have far-reaching and unintended consequences that will drive capital away from our financial markets,” said Rep. Spencer Bachus of Alabama, the top Republican on the Financial Services Committee.

Rep. Tom Price, chairman of the conservative Republican Study Committee, said the legislation was proof that the real goal of Democrats is to seize control of the private sector.

“Our economy has achieved success not through greater government interference and regulation but through competition and rewards,” the Georgia lawmaker said.

But Rep. Melvin Watt, North Carolina Democrat, said the public had made clear its frustration with hefty pay packages on Wall Street as Main Street businesses suffer.

“This is not the government taking over the corporate sector,” he said. “It is a statement by the American people that it is time for us to straighten up the ship.”

The nation’s leading financial lobbies expressed deep reservations about the bill as it moved through the House.

“Decisions regarding incentive compensation programs should be designed uniquely by corporations and their compensation committees,” not by federal regulators, according to the Financial Services Roundtable, which represents some of the country’s biggest financial and banking institutions.

Under the House measure, financial institutions with assets of less than $1 billion would be exempt from the bill’s incentive-based compensation disclosure requirements and related pay oversight.

Sixteen Democrats crossed party lines and voted against the measure. Only two Republicans voted yes: Reps. John J. “Jimmy” Duncan Jr. of Tennessee and Tim Murphy of Pennsylvania.

The measure now goes to the Senate, which is not expected to take it up until after returning from its August break.

Congress in February restricted bonuses and other forms of pay for top managers at banks and companies that got help last fall under the government’s $700 billion financial industry bailout, the Troubled Asset Relief Program, or TARP.

Some banks, such as Citigroup, have not repaid their government aid and must adhere to the limits. Others, such as Goldman Sachs, Morgan Stanley and JPMorgan Chase, have repaid the funds and are now free of the restrictions.

Goldman Sachs in July reported sharply higher quarterly profits and set aside $6.65 billion for compensation, putting its average compensation at $900,000 in 2009. The firm last year accepted $10 billion of taxpayer aid.

A study released Thursday by New York Attorney General Andrew M. Cuomo reported that nine of the financial firms that were among the largest beneficiaries of TARP bailout money paid out bonuses of $1 million or more to about 5,000 bankers and traders.

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