Press Releases

Response To Democrats Inaccurate Information Regarding Executive Compensation Bill

WASHINGTON, January 22, 2010 -

-In response to Republicans introducing legislation to protect taxpayers by suspending the Obama Administration's approval of multi-million dollar pay packages at Fannie Mae and Freddie Mac, Chairman Barney Frank earlier today mischaracterized the Democrats' legislation (H.R. 1664) to address executive compensation at financial institutions receiving government capital injections.

Contrary to Chairman Frank's assertion, H.R. 1664 does not provide community banks with an exemption from the bill's requirements.  Rather, it only authorizes the Secretary of the Treasury - in his sole discretion - to grant such exemptions.  Nobody is exempted unless and until the Treasury says so. As the bill states, "The Secretary may exempt community financial institutions from any of the requirements of this subsection, when the Secretary finds that such an exemption is consistent with the purpose of this subsection."

Ranking Member Spencer Bachus made the following statement earlier today:

Chairman Frank has rebutted Financial Services Committee Republicans' criticism of the Christmas Eve compensation packages awarded to Fannie Mae and Freddie Mac executives by blaming Republicans for opposing executive compensation legislation that passed the House in April 2009 (but was never considered in the Senate) that included a provision prohibiting Fannie and Freddie from making any compensation payments that are "unreasonable or excessive," and any bonus payment that is not "performance-based," so long as taxpayers' investment in the firms remains outstanding (H.R. 1664). 

In response it is important to note the following:

  • The provision cited by the Chairman was part of a larger bill that Republicans (and some Democrats) opposed on the House floor.  The bill which the Chairman touts has never been taken up in the Senate, which the last time I checked is still controlled by his party.
  • That larger bill - which was hastily thrown together as a political response to the public outcry over bonuses paid to executives at AIG - was a bad bill, and I make no apologies for opposing it. 
  • H.R. 1664 would have given government bureaucrats virtually unbridled authority to write compensation rules for all institutions receiving direct capital investments by the government, including community banks across America that received funds under the Capital Purchase Program (5% loans and warrants).  It was an overly broad bill that applied to all employees rather than just top executives.  While supposedly targeted at compensation practices at large financial institutions like AIG, it unfairly penalized small community banks with responsible compensation arrangements that had nothing to do with the excesses on Wall Street.  
  • The bill gave the Treasury Secretary carte blanche to define "unreasonable and excessive" compensation, and set performance-based measures. It authorized him, with the approval of the members of the Federal Financial Institutions Examination Council and in consultation with the Chairperson of the TARP Congressional Oversight Panel, to become the arbiters of what is "unreasonable or excessive" compensation.
  • Given its limited mandate, the Congressional Oversight Panel and its chairman, Elizabeth Warren, have no expertise on the issue of executive compensation, no expertise on the subject of corporate governance and no formal legal standing even to issue recommendations on policy questions.


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