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Wall Street – The Next Generation

Last week lawmakers took another step toward curbing "excessive" employee pay at financial firms that receive government bailout funds.

The House approved a bill, by a 247-171 vote, which would give the U.S. Treasury broad powers to prohibit "unreasonable and excessive" compensation and bonuses that are not based on performance standards.

And that has some top talent packing their bags.

Cantor Fitzgerald is one of those smaller firms gobbling up top talent and its CEO Shawn Matthews tells us he’s looking to hire even more people.

“But it’s not about poaching,” explains Matthews, “it’s about people wanting to come to a place that’s actually growing and wanting to feel good about going to work everyday.”

However some, including our own Jeff Macke, would argue that the trend is not nearly so altruistic. That instead, Matthews is attracting new talent because Cantor Fitzgerald is not subject to the onerous TARP rules restricting compensation.

Devil In The Details

Under the legislation, new compensation curbs would apply to all employees, not just executives, of firms that have received capital investments from the Treasury's $700 billion financial rescue fund. The standards also would cover compensation paid to an employee after leaving a firm or before joining it.

The "Pay for Performance Act of 2009" is among a number of efforts by Congress to claw back bonuses and curb pay in the wake of public anger over recent executive bonuses at insurer American International Group, which has received a bailout worth up to $180 billion.

"The Pay for Performance Act is based on two simple concepts. One, no one has the right to get rich off taxpayer money, and two, no one should get rich off abject failure," said one of the bill's authors, Representative Alan Grayson, a Florida Democrat who co-authored the measure. "We should not pay an arsonist to put out his own fire, and we should not be paying an executive to ruin his own bank."

The measure is largely expected to sideline a bill previously passed by the House of Representatives that aimed to impose a 90 percent tax on bonuses for certain executives at companies that receive taxpayer bailouts. That measure appeared to be losing momentum in the Senate.

The new and less aggressive approach would authorize the Treasury to provide the guidance on what is unreasonable or excessive, and what constitutes performance-based pay. Firms that pay back their government funds or set up a repayment schedule with the Treasury will no longer have to comply with the limits.

Also exempted are community banks that receive less than $250 million in government funds.

The bill will now move to the Senate, where Democrats have a much thinner majority, and efforts to impose controls and restrictions on companies receiving government aid have been more moderate.



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Trader disclosure: On Apr 7th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WFC), (AAPL), (WMT), (SDS), (GS), (GE); Terranova Owns (X), (KCE), (AMGN), (DELL), (DIS), (BP), (BRCM); Terranova Owns (COP) Calls, (HES) Calls, (IBM) Calls; Terranova Owns (JPM) & (JPM) Calls; Terranova Owns (INTC) & (INTC) Calls; Finerman Owns (AXP), (RIG); Finerman's Firm Owns (RIG), (UNH), (MSFT), (PBR); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (BBT), (WFC); Seymour Owns (AAPL), (BAC), (EEM), (FCX), (FXI), (F), (GLD); Seymour Is Short (USO)