This was a vote on an amendment offered by Rep. Frank (D-MA), which would eliminate certain prohibitions on the ability of the federal government to require the return of certain annual bonuses paid to banking executives. There had been a great outcry during this period of economic decline about the large bonuses that executives were receiving at banks and other financial institutions that had recently received federal “bail outs” in order to remain in business. H.R. 3269 was developed partly in response to that outcry. The bill gave federal banking regulatory agencies the authority to prohibit certain pay structures and arrangements for executives and individuals as well as to revise specific bonus incentive arrangements.
The Frank amendment clarified and expanded that authority. It also required all publicly traded companies to hold an annual, non-binding, shareholder vote on pay and bonuses for executives. At the same time, the amendment prevented the federal government from requiring executives to return certain incentive-based pay and bonuses awarded under any arrangement that was already in effect when H.R. 3269 was enacted into law.
Rep. Frank is the chairman of the House Financial Services Committee, which developed H.R. 3269. He noted that there had been concern about the government requiring executives to “give back bonuses they'd already received. That would be arbitrary . . . and I agree that there should not be people's pay subjected unreasonably to arbitrary retroactive decisions.”
Frank also noted that he had only recently learned about “an SEC decision that said that where someone had received the compensation and it subsequently turned out that the transaction was not profitable, although it (had originally) appeared to be, that a return of the money that was given . . . might be appropriate. So our language reflects that (at the same time that) . . . It does give some protection against arbitrary return.”
Rep. Price (R-GA), a Republican member of the Financial Services Committee, led the opposition to the amendment. He said that there was originally bipartisan support in the committee for a provision stating that “no compensation of any executive having been approved by a majority of the shareholders may be subject to any callback . . . retroactivity, unless it was part of the contract or unless there had been fraud committed.” Price noted that this provision “was put into the bill (during committee deliberations) with the caveat that Chairman Frank wanted, potentially, a few changes.
Price then claimed: “(T)here weren't any discussions before the amendment that we now have before us was offered . . . to the (provision) . . . adopted in a bipartisan manner in the committee. And what does the new amendment . . . mean? Well, it means that the SEC, that is the federal government, will be able to dictate pay . . . to publicly held companies. Now, that may be okay if they take (bail out) . . . money, but this would be publicly traded companies that don't take a dime of tax money.”
Price argued that “the Democrat majority has a great desire to have the government everywhere in our lives, whether it's in financial institutions (or other areas) . . . .” He added that the amendment “gets to the heart of whether or not we are going to allow the federal government into decisions that ought to be left in a free market and in a private-sector arrangement . . . It cuts at the very core of our free market system.”
The amendment passed by a vote of 242-178. Two hundred and forty-one Democrats and one Republican voted “aye”. One hundred and sixty-nine Republicans and nine Democrats voted “nay”. As a result, language was adopted regulating the manner in which the federal government could require certain bank executives to give back a portion of their pay and bonuses.