Bank Exec Pay Curbs Part Of House Stimulus Bill

The House voted Friday to restrict bonuses and other forms of pay for top managers at banks and firms being helped by taxpayers under the $700 billion financial industry bailout.

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The pay curbs were approved as an amendment to a $787 billion economic stimulus package that next goes to the Senate for a vote. If approved there, it would go to President Barack Obama, who is expected to sign it into law.

The pay curbs would apply to companies getting taxpayer aid under the Treasury Department's Troubled Asset Relief Program, or TARP. The program was launched in October by the Bush administration as an emergency effort to stabilize the troubled financial system.

Under the measure drawn up by Sen. Christopher Dodd, a Democrat and chairman of the Senate Banking Committee, "golden parachute" severance packages for top executives at TARP beneficiaries would be banned. So would pay plans that "encourage manipulation of the company's reported earnings."

Bonuses that encourage senior managers "to take unnecessary and excessive risks that threaten the value" of the company would also be prohibited under Dodd's measure.

"The decisions of certain Wall Street executives to enrich themselves at the expense of taxpayers have seriously undermined public confidence in efforts to stabilize the economy," Dodd said in a statement. "These tough new rules will help ensure that taxpayer dollars no longer effectively subsidize lavish Wall Street bonuses."

The Treasury Department could "claw back" past pay and bonuses from senior executives of TARP recipient companies if the compensation was found to have been awarded wrongfully or based on inaccurate criteria.

In addition, "say on pay" rules would be imposed on TARP firms to give shareholders more influence on pay decisions.

President Barack Obama last week set a $500,000 cap on executive pay and imposed other restrictions on companies that receive TARP money. Obama's rules were not retroactive.

Dodd's provision would affect all TARP recipients, past and future.

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