A House panel endorsed a gentler approach Thursday to trying to stop bailed-out financial institutions from giving their employees big bonuses, as lawmakers indicated they were willing to put down their pitch forks and partner with industry to salvage the economy.
The bill directs Treasury Secretary Timothy Geithner and financial regulators to set standards that would determine whether a bonus is "unreasonable or excessive."
It would exempt institutions that agree to participate in a government-sponsored program aimed at buying up $1 trillion of bad debt, or "toxic assets," sitting on the books of major banks. Geithner proposed the new investment program on Monday.
The House Financial Services Committee adopted the measure by voice vote, paving the way for a floor vote as early as next week.
The bill, sponsored by Democratic Reps. Alan Grayson of Florida and Jim Himes of Connecticut, was in stark contrast to the approach taken last week by lawmakers furious at insurance giant American International Group. AIG distributed nearly $165 million in employee bonuses after the government committed more than $182 billion to keep the company afloat.
Fueled by populist anger, the House voted 328-93 to tax away 90 percent of any bonuses agreed to in 2008 and paid this year by AIG or other recipients of bailout money.
But that measure stalled in the Senate, as President Barack Obama warned not to "demonize" every investor. Geithner also said industry's help would be needed to buy up the billions of dollars of sour mortgage securities, or "toxic assets," sitting on the books of major banks.