The U.S. House of Representatives on Friday passed a bill that would allow regulators to cap or prohibit Wall Street bonuses and compensation packages for executives if such pay practices are deemed to enduce or encourage excessive financial risk-taking that could damage economic conditions.
The House passed the bill one day after New York Attorney General Andrew Cuomo announced that almost 4,800 employees from nine banks receiving aid from the U.S. government received bonuses of $1 million or more in 2008. For example, Citigroup, which received $45 billion in government aid and lost $18.7 billion last year, reportedly doled out at least $1 million in bonuses to 738 of its employees.
The bill gives the Securities and Exchange Commission and other banking regulators 9 months to propose rules for regulating compensation packages for banks with assets over $1 billion, according to the New York Times. The prohibition would not apply to banks with under $1 billion in assets. The bill would also grant shareholders in public companies a “say on pay” by giving them a nonbinding vote on executive pay, a measure that President Obama has publicly supported.
Treasury Secretary Timothy F. Geithner expressed the Administration’s support for the bill, saying it was “a positive step forward to increase accountability and transparency in executive compensation, and to help ensure that pay encourages long-term performance, not excessive risk-taking.”
Most House Democrats voted for the bill (including Rep. Barney Frank (D-MA) who introduced the legislation), while most Republicans voted against it. It passed by a vote of 237-185. The bill will now go to the Senate for consideration, but not until after its August recess.