The public comment period for this legislation has ended.

Emergency Economic Stabilization Act of 2008

17 section comments

Title I - Troubled Assets Relief Program

Sec. 111. Executive Compensation and Corporate Governance.

  1. APPLICABILITY.Any financial institution that sells troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and© and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable.




  2. DIRECT PURCHASES.




    1. IN GENERAL.Where the Secretary determines that the purposes of this Act are best met through direct purchases of troubled assets from an individual financial institution where no bidding process or market prices are available, and the Secretary receives a meaningful equity or debt position in the financial institution as a result of the transaction, the Secretary shall require that the financial institution meet appropriate standards for executive compensation and corporate governance. The standards required under this subsection shall be effective for the duration of the period that the Secretary holds an equity or debt position in the financial institution.




    2. CRITERIA.The standards required under this subsection shall include




      1. limits on compensation that exclude incentives for executive officers of a financial institution to take unnecessary and excessive risks that threaten the value of the financial institution during the period that the Secretary holds an equity or debt position in the financial institution;




      2. a provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior executive officer based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; and




      3. a prohibition on the financial institution making any golden parachute payment to its senior executive officer during the period that the Secretary holds an equity or debt position in the financial institution.






    3. DEFINITION.For purposes of this section, the term "senior executive officer" means an individual who is one of the top 5 executives of a public company, whose compensated is required to be disclosed pursuant to the Securities Exchange Act of 1934, and any regulations issued thereunder, and non-public company counterparts.






  3. AUCTION PURCHASES.Where the Secretary determines that the purposes of this Act are best met through auction purchases of troubled assets, and only where such purchases per financial institution, in the aggregate exceed $300,000,000 (including direct purchases), the Secretary shall prohibit, for such financial institution, any new employment contract with a senior executive officer that provides a golden parachute in the event of an involuntary termination, bankruptcy filing, insolvency, or receivership. The Secretary shall issue guidance to carry out this paragraph not later than 2 months after the date of enactment of this Act, and such guidance shall be effective upon issuance.




  4. SUNSET.The provisions of subsection© shall apply only to arrangements entered into during the period during which the authorities under section 101(a) are in effect, as determined under section 120.

General Comments on Emergency Economic Stabilization Act of 2008

Rafael DeGennaro on September 29, 2008

During House floor debate on H.Res. 1517 (the procedural rule that prescribes how the bill is considered), Rep. Brad Sherman (D-CA) said this provision was ineffective. Someone may wish to contact his office for details during business hours.

Dan on September 29, 2008

This is extraordinarily weak. Most of the compensation at these firms comes as bonuses to "non-executives". They should have limited compensation, including bonuses, to a specific dollar amount for all employees a companies where they are doing these deals.

As-is, this is just a huge transfer of wealth from taxpayers to i-bankers.

Norman Schlanger on September 29, 2008

The term "golden parachute" is not defined. Hence, the restriction on making such payments is not enforceable. The omission of a definition was probably intentional so as to compromise with those lobbying against it.

Lawrence Bowie on September 29, 2008

Well, agreed, this is very weak, because it only applies if the Secretary has the company in "an equity or debt position", and there are incentive exclusions to the compensation as well.

The gluttonous behavior of these top-level executives when it comes to compensation is out of control in all sectors, not just the financial sectors. I think, in due time, the exorbitant compensation packages for top-level executives needs to be addressed, but it is difficult to address because you do not want government going too far into the regulation of the private sector.

It is difficult to legislate morality when it applies to executive compensation, and we definitely do not want to start down that nebulous and treacherous road.

Anonymous on September 29, 2008

I want hard limits on executive compensation.
Anyone else with a job guaranteed by the fed gets put on the federal payscale. So should these guys. Without real reform starting at the top, practices won't change. Further, I don't beleive the former Chairman of Goldman, who was warned about accounting practices and lack of oversight allowing assets and imcome to be overstated as recently as last year, but did nothing to stop Wall St paying $24 Billion in Christmas Bonuses just 10 months ago, and who will soon be looking for a job from Wall St, should have discretion to set executive compensation.

C.M. Smith on September 29, 2008

We need hard limits on executive compensation. These executives shouldn't get a dime of taxpayer money for driving our economy into the ground.

Brad Johnson, CAPAF on September 29, 2008

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=ayNbl_gpRIFE

A measure set to be voted on in the U.S. House today cuts by more than half the tax subsidy for executive pay at companies that auction at least $300 million in troubled assets to the Treasury. It also denies corporate deductions and imposes a 20 percent surtax on senior officials at those companies who receive large severance packages known as golden parachutes.

Such tax restrictions have been ineffective in the past because they are easy to work around and aren't a deterrent to lavish pay packages, experts say. For one, the deductions only apply to companies making a profit.

"Any executive who can't figure out a way around these restrictions should be fired,'' said Dean Baker, a Democrat and co-director for the Center on Economic and Policy Research, a Washington-based research group.

For companies selling troubled assets directly to the Treasury instead of through an auction with the government taking an equity stake, the prohibitions are more stringent. Those restrictions include salary limits for senior executives and a total prohibition on golden parachute severances.

Cindy McNally on September 29, 2008

This section is too nebulous.......Define limits, state whether this is grandfathered for those who bailed before the Act, define golden parachute, set specific parameters for income.
Get rid of loopholes. The entire bill is filled with vague language. We must not allow these CEO's to walk away from this with fat pockets at our expense.

Jim Pitts on September 29, 2008

When you realize this whole thing was orchestrated on purpose with the intent of killing the dollar to make way for the "invisible money" microchip implantaion and consolidation of power in just a few central banks...then it begins to make sense..

Keith Manning on September 29, 2008

A sense of perspective indicates that the "market" has failed to operate reasonably in setting senior manager compensation (20 times average in 1965, 800 times average in 2008). The most egregious distortion has resulted in the highest compensation being given to the poorest performing managers (Internet bubble followed by finance bubble). This Emergency Act represents a rare (perhaps unique) opportunity to make a much needed correction that the "market" has proven unable to do by itself. Think of this provision as a way to correct a very widespread problem. Make it much stronger and much wider. For example, a punitively high tax rate for any manager (not owner) who rewards themselves with more than 50 times the average they pay to other employees.

Rick on September 29, 2008

Subsection (c) does nothing to limit executive pay. It does not define "golden parachute". It only prohibits any new employment contract with a senior executive officer. It does nothing to limit existing employment contracts. It is only applicable to institutions that sell more than $300,000,000.00. This is unacceptable. This subsection should apply to all participating institutions and all existing compensation packages.

Subsection (d) should be eliminated. The provisions of subsections (b) and (c) should be in force until all taxpayer money is recovered.

All references to "bonus" or "incentive compensation" should be eliminated. This section should apply to all compensation.

David Miller on September 29, 2008

Ditto to all that has been said here. This section is a sham to encourage or embolden members of Congress so they can excuse the bill as having limits on executive compensation. This is a toothless waste of paper.

Kate - average citizen on September 30, 2008

to: Jim Pit - please explain what you mean by invisible money so that some of us not in the financial area can understand. I agree with your statement this is orchestrated for centralization of banks, one of which (citi) now has principle shareholder in Saudi Arabia and China.

Diane on October 1, 2008

Here is what it should be:

Eliminate all bonuses and golden parachutes (cash, options and stocks) for 2008, 2009 and 2010. Fix salaries to a hard number with no raises for 2008, 2009 and 2010. Violations will be prosecuted under RICO provisions (Dept of Justice and SEC). Clawback will be enforced for up to 1 year after Treasury has finished the job.

Rick on October 1, 2008

I think it should read something like this: Executive = any one of the top five executives in any participating firm Executives = the top five executives in any participating firm All bonuses, incentives or other supplemental compensation above base compensation including any increases in compensation received in the preceding two years by executives of any firm participating in this program must be repaid to the firm by said executives. All severance for executives is hereby forfeit for any type of separation including voluntary separation for the period beginning September 1, 2008 and ending when all costs associated with assistance provided to said firm by the government under this program have been recovered in full by the government. Total compensation paid to any one of the executives shall not exceed $500,000.00 annually and is hereby frozen for the period beginning September 1, 2008 and ending when all costs associated with assistance provided to said firm by the government under this program have been recovered in full by the government. Any monies, in excess of the limits established herein, received by an executive of any participating firm after September 1, 2008, must be repaid to the firm by the executive. These provisions apply to any firm participating in this program or receiving benefit under the provisions of this Act regardless of the level of participation.