H.R. 1664, the Pay for Performance Act, generally froze bonus payments for executives and employees of companies that accepted funds from the Troubled Asset Relief (“TARP”) Program until those funds were repaid. The TARP program had been created to assist troubled banks during the serious economic decline of 2008 and 2009, This vote was on an amendment to H.R. 1664, offered by Rep. Bean (D-IL), that allowed for new compensation and bonus arrangements to be made by such banks, as long as they were based on performance standards to be crafted by the Treasury Secretary. It exempted companies that adhere to a repayment program from the coverage of the Act. The Pay for Performance Act was one of several measures put forward in response to reports about multimillion dollar bonuses going to executives of AIG. The federal government was spending hundreds of billions of dollars to keep AIG and other banks solvent under the TARP and news of these bonuses created protests in Congress.

Rep. Bean, speaking in support of the amendment, said it “recognizes that some financial institutions who participated in the TARP did so because they were asked to by the Treasury or wanted to provide additional loans, not because they needed it or had failed in their businesses. While they expected compensation limits for top executives, they did not expect to be disallowed from providing bonuses company-wide.”

Rep, McMahon (D-NY), who co-sponsored the amendment with Bean, added that “bonuses are an important part of employee compensation in the financial services industry. . . This amendment is an incentive for these companies to get back their financial health. Once companies that receive TARP funds start repaying the TARP funding, we will lift these restrictions . . .  If for some reason you stop repaying, then you fall under these restrictions of this bill.”

Rep. Frank (D-MA), who was managing the Pay for Performance Act on the House floor, said that, although the amendment was not “unreasonable”, he did not support it. He expressed concern that, if the amendment passed, banks could announce they were repaying their TARP funds, award the otherwise prohibited compensation, and then adopt a lengthy repayment schedule. His concern was that a lengthy repayment period would suspend the effect of the bill for quite a while.

The amendment passed by a vote of 228-165. One hundred and sixty-five Republicans and sixty-three Democrats voted “aye”. One hundred and ninety Democrats, including the majority of the most progressive Members, and eight Republicans voted nay. As a result, language was added to H.R. 1664 that, under certain conditions, exempted companies repaying loans made to them by the government from the federal restrictions on executive compensation.