Frank Bill Would Ban Bonuses

Posted March 20, 2009 at 3:00pm

Updated: 4:09 p.m.

All bonuses would be prohibited at companies receiving federal bailouts under a new bill drafted by House Financial Services Chairman Barney Frank (D-Mass.).

Frank announced Friday that his committee will consider the bill on Wednesday; it could come to the House floor the following week. The bill comes amid the anti-bonus fervor sparked by $165 million in bonuses paid to employees at American International Group’s troubled financial products division.

The bill would cover Fannie Mae, Freddie Mac, Federal Home Loan Banks and other financial institutions that have received government help.

All bonuses would be prohibited, regardless of existing contracts, and “unreasonable or excessive” compensation would be prohibited, with the standards set by the Treasury secretary.

Other lawmakers have sought to go even further.

Rep. Brad Sherman (D-Calif.) will introduce legislation to impose a surtax on all compensation over $500,000 at bailed-out companies regardless of whether the money comes from bonuses, salaries or any other payment.

Sherman said the House-passed bill to tax bonuses at 90 percent among companies that received $5 billion in taxpayer aid allows executives to escape the tax by simply ditching the bonuses and paying themselves higher salaries.