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Grayson-Himes Pay for Performance Act of 2009 Sparks Controversy
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by Tina Kells | March 31, 2009 at 10:35 am
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Jim Himes (D-CT) and Rep. Nydia Velázquez (D-NY) meet voters
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Florida Representative Alan Grayson (Democrat) has proposed a piece of legislation that would limit the bonuses and pay for executives of bailout funded banks and financial institutions. Bill HR 1664, or the Grayson-Himes Pay for Performance Act of 2009, as it is called, has already sparked controversy, outrage and debate among conservatives in the US.
The Grayson-Himes Pay for Performance Act of 2009 is fairly simple. It makes it illegal to award executives for failure with "unreasonable or excessive" compensation and specifies that bonuses must be tied to good performance.
The basics of the Grayson-Himes Pay for Performance Act of 2009 explained:
Taxpayer bailout funds should be used first to prevent a collapse of the financial system and next to make the financial system work for current middle-class Americans by addressing the housing crisis and increasing the availability of loans. Under no circumstances should taxpayer funds pay exorbitant executive bonuses. The Grayson-Himes Pay for Performance Act of 2009 prohibits the payment of “unreasonable or excessive” compensation, including bonuses that are not based on performance, by Fannie Mae, Freddie Mac, the federal home loans banks, and firms that have received funds under the Emergency Economic Stabilization Act. The Treasury Secretary must define “unreasonable or excessive” compensation and outline what constitutes an appropriate performance-based bonus using criteria including the stability of a financial institution, ability to repay taxpayer funds, and adherence to appropriate risk management requirements. The prohibition only applies while government payments to the firms are outstanding. Finally, the legislation applies bonus prohibitions included in the American Recovery and Reinvestment Act to all employment contracts. The American Recovery and Reinvestment Act currently exempts employment contracts made before February 11, 2009 from these prohibitions.
The controversy behind the Grayson-Himes Pay for Performance Act of 2009 is already all over conservative blogs. Most opposition compares the act to Big Brother and claims that the Pay for Performance Act is the beginning of a slippery slope of government interference in the banking and financial industries.
Big Brother will set all pay levels once federal bailout funds are received. Remember: some banks were forced to accept bailout money. Byron York, writing in the D.C. Examiner brings to our attention a truly awful prospect:
The House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.
In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."
The suggestion represents an outrageous intrusion of the government into private commerce. The fact that it is sponsored by a man largely responsible for the credit mess takes it beyond imagination.
The Pay for Performance Act of 2009 was introduced by Rep. Alan Grayson (D-Fl) and supported by Rep. Jim Himes (D-Con). Formally known as the Grayson-Himes Pay for Performance Act of 2009 will be voted on by Congress in the first week of April 2009.
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