Posted on 02/04/2009 2:42:44 PM PST by Technical Editor
Would be part of broader bill limiting hedge funds, credit-raters, and mortgage securitizers; 'deeply rooted anger'
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Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.
“There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference today.
He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.
The provision will be part of a broader package that would likely give the Federal Reserve the authority to monitor systemic risk in the economy and to shut down financial institutions that face too much exposure, Mr. Frank said.
Also included in the legislation: registration requirements for hedge funds and proposals aimed at curbing conflicts of interest at credit-rating agencies such as Standard & Poor’s.
The bill, which the committee is working on in consultation with the Obama administration, also will require financial institutions that bundle mortgages into securities to share in potential losses. This would give banks and mortgage-specialists an incentive not to make bad loans, he said. Institutions that securitize loans improperly will incur tougher penalties.
“There have been too few constraints on major financial institutions incurring far more liability than they could handle,” Mr. Frank said.
The committee hopes to have a general outline of the legislation by early April, he said. It will be the panel’s first priority in its effort to restructure financial regulation in the wake of the worst economic crisis since the Great Depression.
Mr. Frank has summoned the CEOs of Citigroup, J.P. Morgan Chase and the seven other U.S. financial firms that got $125 billion from TARP to testify at a Feb. 11 committee hearing.
Mr. Frank seems to be in synch with the Obama administration in his plans for executive compensation.
Treasury Secretary Timothy Geithner said last month that he might try to extend to all U.S. companies a restriction that prohibits bailout banks from taking a tax deduction of more than $500,000 in pay for each executive.
The Troubled Assets Relief Program legislation enacted in October seeks to give companies receiving aid under the $700 billion bailout a number of incentives to curb what it calls excessive executive pay.
Mr. Geithner said he would consider “extending at least some of the TARP provisions and features of the $500,000 cap to U.S. companies generally.”
Under the legislation, banks receiving bailout money must limit golden parachute payments to senior executives to no more than three times the executives’ base pay. The companies also must subject any bonuses or incentives to clawbacks if the payouts are based on bank’s misleading financial statements.
In addition, bailout recipients can’t offer top managers incentives that “encourage unnecessary excessive risks that threaten the value of the financial institution.”
These limits apply to the chief executive officer, chief financial officer and the next three most highly compensated executives in a bank receiving rescue funds.
Mr. Frank said provisions on golden parachute payments and bonus clawbacks would probably be in the legislation, though he declined to provide more detail because “we’re early in the process.”
A congressional oversight panel headed by Harvard Law professor Elizabeth Warren also recommended last week that Treasury consider revoking executive bonuses at failed institutions getting federal aid.
Currently, these institutions must subject bonuses to clawbacks only if the payouts are based on banks’ misleading financial statements.
The top Republican on the committee, Spencer Bachus of Alabama, said last month he has reservations about giving the Fed new powers, such as the authority to monitor systemic risk.
Mr. Frank said today that after lawmakers address issues on systemic risk, they will consider how to bolster investor protection via changes at the Securities and Exchange Commission. The committee also will review proposals to assist struggling homeowners and expand the housing supply, and to strengthen international financial institutions such as the World Bank, he said.
Write to the editors at fw_editor@financialweek.com.
Sorry, folks. I see this is a dupe.
Our only hope would be a new amendment. Repealing all Laws, Rules, Regulations and Treaties since 1960.
What?!
He is nuts! How can he tell anyone what they are allowed to make? If he wants a revolt he can just keep talking like this!
I have a deeply rooted anger against Bwarney Fwank.
Mither Fwank would be vewwy, vewwy happy if you would.
Gotta send this one on.
We are getting scarily close to a revolution with these a__holes in charge.
The age of insanity has begun.
Good - Obama's hands will not only touch the final bill but the actual draft. No shirking this for him.
The top Republican on the committee, Spencer Bachus of Alabama, said last month he has reservations about giving the Fed new powers, such as the authority to monitor systemic risk.
I have absolutely no doubt that Mr. Bachus was a little more animated in his "doubts."
These guys couldn't even wait a week before lumping this on the back of TARP bailouts which are the ONLY situation to even consider such measures. And yet I believe the Dems decided to throw this out there for the very reason that many Freepers and others are against the limit of compensation to any institution that recieves TARP funds - execs would simply go to institutions that didn't recieve TARP funds and thus would not be subject to compensation restriction. Now if they socialistically extend this to all businesses then some of the execs will stay put.
Barney Frank is an evil idiot.
Should go over real big. :)
What's the word I am looking for...Chutzpah. Didn't this clown oversee the Senate Banking Committee, date the CEO of Fannie Mae, support the CRA, and vilify the very same banks when they refused to make these bad loans to people with no income and bad credit.
The policies of the liberal Democrats that control Congress directly caused this crisis now they have the gonads to tell us they have a solution and the solution is Socialism.
He's right about one thing...the American people are mad as hell. Unfortunately for him and his ilk they are about to find out the anger is not directed where they think it is.
If it wouldn’t crash the economy worse since companies would not longer be able to compete for the best managers... I’d take a certain satisfaction in the pain this would cause wealthy Obama supporters.
And if they do this to business in general, I hope they do it Hollywood.
Just end this insane practice already
I like the Chinese way...the guy responsible for the baby formula disaster was executed. Bernie Madoff should be executed. And congress should establish certain financial crimes as capital offenses.
Congressional pay, and the pay of Cabinet members and the president, should be cut to zero based on performance. Actually, Congressmorons should reimburse the Treasury all of their pay for the past five years. Obama and the Cabinet have made the economy worse so far, so they should each pay $10,000 a month to the Treasury as a penalty.
HEY BWARNEY, KISS MY A**, OMG, HE’D LIKE THAT
Clinton tried something like this early in his first administration via the tax code. He exempted one-time shows, like the millions of dollars shows in Vegas.
How about pro athletes? $500,000 is pocket money for them.
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