TARP Comp Limits Bill Passes House, Awaits Senate Action
On April 1, the Grayson-Himes Pay for Performance Act of 2009, H.R. 1664, passed in the house. The bill imposes compensation restrictions on any employee of any entity that has an outstanding direct capital investment from the Troubled Asset Relief Program (TARP) and employees of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
"Community Financial Institutions" may be exempted by the secretary of the Treasury as may institutions that have entered into a payment schedule with the Treasury (with excessive compensation payments subject to a clawback if the institution defaults on its payback terms).
The Act prohibits compensation that is unreasonable or excessive according to standards to be established by the Treasury Dept. or if it includes any bonus or other supplemental payment not directly based on such standards. The prohibitions apply regardless of whether the compensation is under a pre-existing agreement or a new compensation arrangement.
The bill requires institutions with outstanding TARP funds to report to the secretary of the Treasury within 90 days of the bill's enactment and annually thereafter listing how many employees received or will receive total comp above $500,000. The report must indicate how much of the comp is considered to be a bonus. The identity of the recipients need not be reported. Reports must be published by Treasury on the internet.
The bill does not indicate how comp already paid will be reclaimed by the government. Treasury's implementing regs will likely provide the procedure for such reclamation.
As of April 15, the Senate has not voted on the bill. Stay tuned.
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William T. Repasky practices with the Litigation Department at Frost Brown Todd. He focuses on lending and commercial services; banking litigation and financial institutions.