House Democrats hope to capitalize on lingering public outrage over the AIG bonus scandal to move legislation that would limit the pay of employees who work for companies using federal bailout money.
The bill, expected to pass Tuesday, would go back in time to amend the $700 billion bailout bill Congress passed last October with the prohibition of “unreasonable and excessive compensation and compensation not based on performance standards” at companies that accepted government money.
The proposal comes one week after the House voted overwhelmingly to institute a tax of 90 percent on the $165 million in bonuses handed out last month by the American International Group, which received $173 billion in federal aid.
Enthusiasm for the bill died quickly, however, when questions of its legality arose and the White House refused to back it.
Democrats vowed to try another approach.
The bill would give Treasury Secretary Timothy F. Geithner the authority to decide the pay of any employee working for a bailout recipient, though the bill is clearly aimed at avoiding the kind of bonus distribution that occurred at AIG.
While more than 500 companies have received bailout money, the bill would only apply to the companies that took more than $250 million. That list of more than 50 companies includes JP Morgan, Citigroup, Bank of America and General Motors.
“This is a very simple bill,” said Rep. Ed Perlmutter, D-Colo. “It just says that no financial institution while it has taxpayer money can pay excessive compensation or anything other than performance bonuses. The executives cannot hold the company hostage, as they did in the AIG instance.”
But Republicans said the bill threatened financial institutions, would undermine the government’s ability to recruit financial institutions to participate in the bailout and threatened the general recovery of the financial sector.
“Some in the majority have once again let expedience override public sense” Rep. Lamar Smith, R-Texas, said. ”Why would we scare private institutions away now just when we need them the most?”
The fate of the legislation now rests with the Senate. Senate Majority Leader Harry Reid, D-Nev., has not indicated whether he will take up the bill.
New poll numbers may influence Reid’s decision. A Quinnipiac University survey found that 81 percent of respondents believe companies getting a hand from the government should be subject to government pay limits.
