Core Provisions: This legislation would amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards. The bill would prohibit financial institutions that have received TARP funds or capital investment under the Housing and Economic Recovery Act from making any unreasonable or excessive compensation payment to any executive or employee whether under a pre-existing compensation arrangement or a new compensation arrangement. It would also prohibit bonuses or other payments not based on performance standards. The standard for “unreasonable or excessive” payments and for “performance-based” would be established by the Secretary of the Treasury within 30 days of enactment of the legislation.

Amendments to the bill allow the Secretary to exempt financial institutions receiving $250 million or less in TARP funds and allow institutions that enter into a payment schedule with the Department of Treasury according to the Treasury’s terms to no longer be subject to the bonus and compensation restrictions. An additional amendment exempts severance pay from coverage, subject to certain requirements, and establishes a Commission on Executive Compensation to study the executive compensation system for recipients of direct capital investments under TARP and make recommendations for legislative and regulatory action.

Status: Rep. Grayson (D-FL) introduced H.R. 1664 on March 23, 2009, and it passed the House on April 1, 2009.