House Committee Approves GSE Bonus Ban

The House Financial Services Committee has passed a bill which could prohibit financial firms or government sponsored enterprises receiving capital infusions from the government from paying retention or other supplemental bonuses until they repay all federal assistance. In the version passed by a 38-22 vote, H.R. 1664 allows performance bonus provided those bonuses are not "excessive or unreasonable" as determined by the Treasury secretary, federal banking regulators and a watchdog panel that oversees the Troubled Asset Relief Program. If passed by Congress and signed into law, the legislation would stop retention bonus programs at Fannie Mae and Freddie Mac. The Financial Services Committee chairman Barney Frank, D-Mass., stressed that the restrictions on bonuses will not apply to investors that purchase bad assets from banks and other financial institutions. The House panel also passed a resolution that directs Treasury secretary Timothy Geithner to provide the committee with "any government communications" relating to the payment of bonuses to executives of American International Group.