This was a vote on passage of H.R. 3269, a bill that gave federal regulatory agencies the authority over the level of executive pay and bonuses, and also imposed new restrictions on the manner in which executive pay and bonuses are determined. The bill had been developed partly in response to the great outcry during this period of economic decline about the large bonuses that executives at banks and other financial institutions were receiving, particularly at those receiving federal “bail outs” in order to remain in business. H.R. 3269 also required all publicly traded companies to hold an annual, non-binding, shareholder vote on pay and bonuses for executives.

Rep. Frank, (D-MA), the chairman of the Financial Services committee that developed H.R. 3269, said that Democrats “believe the federal government has (an) interest--not in the level of compensation, that's up to the shareholders -- (but) in the (pay) structure. When you have, as we have seen, structures whereby companies lose lots of money . . . but the people who made those deals make money on them, that has a systemic negative impact on this society because it incentivizes much too much risk.” He claimed that “the Republican approach” is to do nothing except “admit that these are problems.”

Frank referred to the charge by opponents of the bill that it essentially creates wage controls as “nonsense.” He explained that “what it says is that the SEC shall impose rules that prevent excessive risk-taking, and the reference to wages is only in that context . . . What this bill explicitly aims at is the practice whereby people are given bonuses that pay off if the gamble or the risk pays off, but don't lose you anything if it doesn't. That is, there is a wide consensus that this incentivizes excessive risk . . . All we are saying is that there has to be some balance to the risk-taking.”

Frank also referred to the charge by opponents “this will cause us a problem with international competition.” He noted that England, which he referred to as “our major financial competitor” has adopted the same rules as are in H.R. 3269.

Rep. Bachus (R-AL), the Ranking Republican on the Financial Services Committee, was leading the opposition to the bill. He said “Republicans have introduced legislation, which gets the American people out of the bail out business--that is our response--and prohibits the government from picking winners and losers. We believe that's the solution.” He went on to argue that Republicans have sponsored legislation that “clearly establishes a structure where failure is not rewarded and market discipline is reestablished . . . .”

Bachus summarized his opposition to H.R. 3269 by calling it a “sweeping power grab into the private sector under the guise of the government's riding to the rescue”, which relies “on the government to fix the problem . . . (that) . . . to a great extent was caused by . . . (a) lack of regulation by the government.”

The legislation passed by a vote of 237-185. Two hundred and thirty-five Democrats and two Republicans voted “aye”. One hundred and sixty-nine Republicans and sixteen Democrats voted “nay”. As a result, the House approved and sent on to the Senate a bill that gave federal banking regulatory agencies authority over executive pay and bonuses, and also increased the level of shareholder input on the way pay and bonuses are determined.