Corporate and Financial Institution Compensation Fairness Act of 2009

Mr. Speaker, pursuant to H. Res. 697, I call up the bill (H.R. 3269) to amend the Securities Exchange Act of 1934 to provide shareholders with an advisory vote on executive compensation and to prevent perverse incentives in the compensation practices of financial institutions, and ask for its immediate consideration.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days on this bill to revise and extend their remarks and include therein extraneous material.

Mr. Speaker, I recognize myself for such time as I may consume.

Mr. Speaker, I have encountered gaps between rhetoric and reality in this Chamber, never one as great as the wildly distorted description of this bill that we've got before us.

Let's be very clear. There are differences between the parties here on the whole, at least as reflected in the committee vote. I think it will probably be different on the floor. There is much less difference than there used to be about one piece of it, the say-on-pay.

When the say-on-pay bill came up previously in 2007--by the way, when the Republicans were in the majority prior to 2007, on this, as on many other issues, we Democrats tried to do some reforms, predatory lending being one--we got nowhere--credit cards being another. We did try, in our Committee on Financial Services, to bring this up. The Republicans used their majority not to allow it.

In 2007, when we were in the majority, we did bring it to the floor, and it passed over the objection of most Republicans, and I will introduce into the Record their comments denouncing say-on-pay. But 2 years later, they have moved some. So they are now for reform on say- on-pay, many of them, although a somewhat watered-down form.

I should say there is a stark difference between us remaining on whether or not any action should be taken whatsoever by the Federal Government to restrain compensation practices that inflict excessive risk on the economy. We should be very clear; this assertion that this amounts to control of all wages and prices is nonsense. There is, of course, nothing about prices at all in the bill. As to wages, 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.

The amount of wages is irrelevant to the SEC. 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 for you a shorter time. If you're the head of a financial institution or you're one of the decisionmakers or you take actions that are risky and 1 month later it looks like they paid off and you get your money and then 6 months later it turns out it blew up, you don't lose any of the money you got. And if at the outset you take a risk and it costs the company a lot of money, that doesn't cost you anything.

All we are saying is that there has to be some balance to the risk- taking. And people ask, What is excessive risk? Excessive risk is when the people who take the risk pay no penalty when it goes wrong; when they have a heads they win, tails they break even situation; when the company loses money and the economy may suffer, but the decision-makers do not.

Now, one of the sillier remarks we heard was this will cause us a problem with international competition. In fact, say-on-pay, when the Republican Party overwhelmingly opposed it 2 years ago, was already borrowed from Great Britain, the United Kingdom. And we were told during 2006 that we were losing a lot of business to Great Britain, that we should cut back on Sarbanes-Oxley, for instance, because people would go to England. But England had the very proposal that they were saying was going to drive people away.

In fact, today--I will read from an article from a couple weeks ago. The Prime Minister of England says they are going to adopt plans forcing banks to hold back half of all bonuses for up to 5 years to discourage excessive risk-taking. That's our major financial competitor. And the conservative opposition is critical because it's not mandatory.

We have been in conversations with the European Union, the United Kingdom, with Canada, and others. This will be done on a coordinated basis. In fact, American salaries, American compensation has been much higher.

So, no, there is no price control; no, there is no wage control; no, it is not a problem for international competition. And by the way, as to every institution, every credit union--you heard that rhetoric--the bill exempts any institution with less than $1 billion in assets, and it gives the SEC the authority to even raise that so there's even less. But here's the nub of it: The Republican Party has reluctantly been dragged--reality sometimes has an impact--to supporting a watered-down version of say-on-pay.

Say-on-pay, by the way, says that the shareholders of the company can vote and express their opinion. The gentleman from Texas was upset that we don't have a Federal Election Commission mechanism for these votes. But why only these votes? Shareholders vote on everything. Apparently it's only when the shareholders tend to vote on pay that Republican sensibilities are trampled.

We do not, in this bill, talk about the amounts. We do say the shareholders should. We say, in consultation with all the advocacy groups who represent shareholders and pension funds and elsewhere, that the people who own the company, the shareholders, should be able to express their opinion on the compensation.

We go beyond that to say that we believe the Federal Government has interest--not in the level of compensation, that's up to the shareholders--in the structure. When you have, as we have seen, structures whereby companies lose lots of money, and they lose lots of money on particular deals, 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.

Now, what is the Republican approach to that? Nothing. They admit that these are problems. They regret that these things are happening, but their regrets won't stop the damage. In the Republican substitute there is a watering down of say on pay, but they at least acknowledge that reluctantly. But when it comes to the practice of large corporations in the financial area structuring bonuses that incentivize excessive risk, my Republican friends admit that that's the case and lament it and are adamant that we should do nothing about it. That's the big difference.

We believe that the SEC--and by the way, as to the form, it was a Republican former Member of this body, Christopher Cox, who was Chair of the SEC, proposed disclosure. He broached it first. He said we have an important public interest in knowing it.

So we are going to take the form of disclosure of compensation prescribed by a Republican Member of this House as Chairman of the SEC, with his colleagues, and let the shareholders say yes or no. We are going to go beyond that and say that the SEC should look at this and say, you know, you have a situation here where people making the decisions will have an incentive to take too much risk. If you tell people that if they take a risk and it pays off they are enriched, and if it fails miserably, they don't lose anything, they will take more risk than rationally should be taken.

You should not incentivize people to take risks where they can only benefit and never suffer a penalty. That's all this bill says. We will prevent that kind of thing from happening. We won't set amounts. We won't deal with wage controls. We won't do anything else, and we exempt institutions under $1 billion.

So I await the Republican counter. Yes, they want to water down say- on-pay, but they reluctantly accept it, but they have zero to offer with regard to the situation of excessive bonuses. And yes, we did get some reluctant agreement that we put some limits on the people who are recipients of TARP funds, but one of those who received TARP funds prospered with those funds, paid back the funds, and are now engaging in the same risky bonus practices they had before.

The Republican position, at least in committee, was to do nothing about it, zero. Ours is, have rules, not that set the limits, not that set wage controls, but simply say that you cannot structure it so that whatever level of compensation you have, you profit if the bonus pays off and you lose nothing if the bonus causes great damage to your company and the economy.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself 3 minutes to deal with some of these comments.

First of all, I am struck by the fact that the gentleman, as he indicated in our markup, is sufficiently nervous about the political implications of opposing this bill and having the House take no action whatsoever to deal with the problem of risk-incentivizing bonuses but he wants to debate cap-and-trade and health care. They're not before us. What's before us is this bill. And when Members debate the bills that aren't there, it's an indication that they're a little shaky on the bills that are there.

Secondly, yes, it does say that they can deal with all wages but not in general. The gentleman reads very selectively. The language about taking action is in this context: to determine whether the compensation structure is aligned with sound risk management, is structured to account for the time horizon of risks, and will reduce unreasonable incentives by such institutions for employees to take undue risks.

It is limited in its grant of authority only to structures that incentivize excessive risk. There is no mandate here to set wages for anybody. There is no mandate to say this percentage is bonuses and that percentage is pay. It is a mandate only to act where the structure incentivizes risk, as has been recognized as part of the problem, very broadly.

I will plead guilty to one issue, yes. We are not in this case taking orders from the Obama administration. And maybe having represented a party that took orders from the Bush administration, they now wish they didn't, but that's not an example I want to follow. I am not here as a Member of Congress or as chairman of a committee to do whatever the administration says. I am here for us to put our independent judgment on it.

The gentleman closed with the key difference between us: the Republican position, as he articulates it--and I don't think it will be the unanimous position--is have the Federal Government take no action whatsoever to restrain the granting of bonuses that incentivize excessive risk. If they pay back that TARP money having benefited from it--and, by the way, on the bailout, every single bailout now underway happened under the Bush administration. But their position is, do nothing to deal with this. We take the opposite position.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 4 minutes to a member of the committee, the gentleman from Georgia (Mr. Scott).

Mr. Speaker, I yield myself 30 seconds to say on behalf of the Obama administration, I welcome this very temporary expression of deference to their views. It will not last very long. As soon as it is politically convenient, it will disappear. So I urge them to enjoy that brief moment of graciousness.

Mr. Speaker, I yield 4 minutes to the gentleman from Texas (Mr. Al Green).

Mr. Speaker, I yield myself such time as I may consume.

There is, of course, a contradiction here. When we are talking about a power, namely, to reduce excessive risk incentivizing bonuses that the Republicans want to defend, they talk about the unelected bureaucrats. The unelected bureaucrats can't be trusted. Except the gentleman from Texas, of course, just closed by saying don't worry, the unelected bureaucrats are out there to protect us.

The unelected bureaucrats in the Republican cosmology are like the Obama administration: they are either convenient whipping boys or great sources of wisdom, depending on where Republican ideology turns to them. But the gentleman from Texas just said we don't have to worry. We have those, as his colleagues called them, unelected bureaucrats to do it.

But I am interested, I have noticed a number of Members have said they don't like the bonuses. Is there a Republican proposal to deal with the bonuses that are being given?

Our proposal does not empower anybody to limit the amounts. The question is, is there a Republican proposal that would deal with what Paul Volcker and Ben Bernanke and the financial regulators in England and Warren Buffett and many others believe is a destabilizing tendency to give out bonuses that give you an incentive to take excessive risks, excessive in the sense that you benefit if the risk pays off and you don't lose.

We want people to take risks, but we want them to take risks which balance the upside and the downside, not which just look only at the upside. And I continue to point out not in that committee, not in that 12 years they controlled this place, not during this debate today, not in the Rules Committee, we have not seen a single Republican proposal to deal with bonuses.

Their position apparently is however the financial industry wants to structure bonuses, no matter what they say, that you get a bonus if it pays off in the short term and it turns sour in the long term. You get a bonus if it pays off, but you don't lose a thing if it doesn't pay off. They would leave that entirely unchanged. I think that is very dangerous to the economy, and, yes, there is a consensus among financial regulators and others that this has contributed to risk- taking.

We all believe in the free-market system and the incentives. How can it be that you acknowledge that there is a system which says to people, take a risk, because it is risk-free for you?

It's risk-free for the individual. It's risky for the company; and when you accumulate all those risks for the company, it's risky for the economy. We're saying, if it's risky for the company and risky for the economy, it ought to be risky for the individual. We want an alignment of risks. We don't want risk-free individuals taking big risks on behalf of those who are going to have to suffer. We have a proposal to restrain that. The Republican position on that is, do nothing. Let them keep going exactly as they have been going.

Let us return, as I said the other day, to the thrilling days of yesteryear when the lone rangers will ride again, untrammeled by any set of rules. They will be able to continue to give themselves bonuses that allow them to be free of risk. That's the deal. The company will face risk. The economy will accumulate and face risk. But the decision- makers will be free of the risks' negative side; they will gain from the risks' positive side; and like rational people, they will take more risks.

I reserve the balance of my time.

Mr. Speaker, there is a little bit of an imbalance. I would ask if I could reserve for one more speaker while I work something out.

Well, Mr. Speaker, I yield myself 15 seconds to say I welcome the gentleman from Georgia to the cause of say-on-pay. When we debated this on March 22, 2007, he was quite critical of it. So maybe 2 years from now, he will think we should do something about excessive, incentivizing bonuses.

I now yield for a question to the gentlewoman from California.

Yes. As to section 4, if they are public companies, they are covered by say-on-pay. And there may be companies not now federally regulated that may become so by decision. But as of now, if they're not federally regulated, they're not covered. Of course AIG was federally regulated by the OTS, so they would have been covered. The gentlewoman is correct.

Mr. Speaker, I have no further requests for time, and I have only one more speaker. So I am going to reserve the balance of my time.

Mr. Speaker, Aflac was the first publicly traded company to give shareholders an opportunity to vote on executive compensation, commonly referred to as say-on-pay. Aflac CEO Daniel P. Amos explained the company's decision to voluntarily adopt the measure by saying, ``Our shareholders, as owners of the company, have the right to know how executive compensation works. An advisory vote on our compensation report is a helpful avenue for our shareholders to provide feedback on our pay-for-performance compensation philosophy and pay package.''

The first year of the vote, 2008, 93% of the shareholders voting approved the company's pay-for-performance compensation policies and procedures. In May of this year, 97% of the shareholders voting cast ballots in favor of the compensation policies, even though the stock price of virtually all financial companies had declined--including Aflac's. The results of both shareholder votes clearly demonstrate that shareholders appreciate Aflac's philosophy of paying for performance and the company's long history of transparency.

I submit the following for the Record.

[From USA TODAY, July 15, 2009]

CEOs Openly Oppose Push for Say-on-Pay by Shareholders

(By Del Jones)

Top executives have taken a relentless public thrashing as

they lay off workers and fight to keep stock prices above the

floor. In a suffering economy, no one seems happy with

leadership, and the image of CEOs has sunk so low that their

approval scores are now south of those serving in Congress.

But no matter how low their image sinks, nor how shrill the

outrage, executives have remained steadfast in their

opposition to one thing: They are roundly against legislation

that would force companies to let shareholders vote on CEO

compensation packages.

``I wonder if the congressmen backing this legislation

would propose similar laws governing their own

compensation,'' says Steve Hafner, CEO of travel search

engine Kayak. ``I'd love to vote on congressional pay and

perks,''

EXEC PAY: Proposal gives shareholders non-binding say

That executives oppose congressional noodling with their

pay is unsurprising. What is surprising is that they are

willing to go so public in their opposition, even though

passage of a so-called ``say-on-pay'' law is likely, says

Dawn Wolfe, associate director of social research for Boston

Common Asset Management.

President Obama, who co-sponsored say-on-pay legislation

while in the Senate, remains in support, as is the Democrat-

controlled Congress. Likewise the public at large. Focus

groups have been describing CEO pay with words such as

``obscene'' and ``immoral'' rather than words like

``excessive'' or ``overly generous'' as in the past, says

Leslie Gaines-Ross, chief reputation strategist at Weber

Shandwick.

``Everyone I talk to understands say-on-pay legislation to

be a question of when, not if,'' Wolfe says. ``There is a

sense in the investment community that it is inevitable.''

CEOs have opinions like everyone else, but the public

rarely sees that side because positions on anything

controversial risk upsetting customers. When they feel

compelled to take a stand at odds with the public, it is

usually articulated by trade associations and lobbyists, so

as to put CEOs and the companies they run at arm's length

from controversy. Not this time, Even though say-on-pay

legislation is almost a sure thing, CEOs and former CEOs

contacted by USA TODAY spoke out against it, both forcefully

and individually.

``Say-on-pay is just another government regulation and

intrusion into free enterprise,'' says Howard Putnam, former

CEO of Southwest and Braniff airlines.

No one likes downward pressure applied to their pay, and in

this respect CEOs are no different than professional

athletes, rock stars, union members, Social Security

recipients--and elected officials. Howard Behar, former

president of Starbucks, asks: Why not let people vote on the

salaries of government workers? He says government employee

unions influence politicians, who commit huge resources to

pensions and raises to get re-elected.

How say-on-pay would work

Say-on-pay legislation would require companies to give

shareholders an up-or-down vote each year on the compensation

of the top five executives of publicly traded companies. The

vote would not be binding, leaving the final decision in the

hands of boards of directors. However, directors are elected

by shareholders and a shareholder vote against a pay

package would likely pressure directors to rethink the

package and make changes.

The Netherlands requires binding shareholder votes on

executive pay. The U.S. law would model those in Britain,

Australia, Norway, Spain and France, where the vote is non-

binding. Boston Common Asset Management has been pushing

shareholder say-on-pay resolutions for three years, and Wolfe

says she doesn't understand the CEO opposition, as there are

only two examples in Britain when shareholders voted a

majority against a CEO's pay: at GlaxoSmithKline in 2003 and

at home builder Bellway in 2009. It may be true that most

CEOs are fairly paid, she said, which means they have nothing

to fear.

Only 24 U.S. companies have implemented say-on-pay without

legislation, Wolfe says. Of those, only Aflac and RiskMetrics

did so without it first coming to a shareholder vote. The

Securities and Exchange Commission continues to get feedback

regarding say-on-pay at companies that have accepted

government money under the Troubled Asset Relief Program

(TARP).

At Aflac, shareholders approved the pay of CEO Dan Amos by

93% in 2008, and that approval rose to 97% this year when

Amos did not accept a $2.8 million bonus even though he had

met the conditions of the bonus as set by the Aflac board.

``That tells me that (shareholders) had the ability to look

beyond the price of stocks and understand,'' says Amos, who

supports say-on-pay at Aflac but declines to weigh in on what

is best at other companies. Giving shareholders a voice

``takes away the frustration that is out there,'' he says.

``People just want to be heard.''

Sarah Anderson, director of the global economy program for

the liberal think tank Institute for Policy Studies, says

say-on-pay is a first step but does not go far enough to rein

in abuses. She cites oil executives who had big paydays that

had nothing to do with personal performance and everything to

do with spikes in oil prices. But shareholders didn't ``bat

an eye'' because they were happy with rising stock prices.

``Everyone, not just shareholders, has a stake in fixing

the executive compensation system,'' Anderson says.

Ralph Ward, publisher of Boardroom Insider, an online

newsletter about boards of directors, agrees that say-on-pay

does not go far enough, because it offers shareholders ``so

little substance.''

Substance or not, CEOs complain that say-on-pay is

government intrusion into the private sector. Such consensus

among CEOs is rare because they run very different companies

that can be made winners and losers on a range of sensitive

issues, from energy to health care. They lean Republican, but

there are signs that they are increasingly blue, and 40%

supported Democrats during the last presidential primary

season, according to an unscientific USA TODAY survey. But

when USA TODAY last month contacted 31 CEOs and former CEOs

of large companies, 77% were against say-on-pay.

Are CEOs fairly compensated? Two of the 31 CEOs declined to

answer, but 24 of the other 29 (83%) said yes. Five (17%)

said that, in general, CEOs are overcompensated. When asked

if say-on-pay would influence CEO compensation, 76% said yes.

CEO median compensation at S&P 500 companies rose 23% from

2003-2008 despite going down 7.5% to $8 million from 2007 to

2008, according to Equilar, which tracks executive

compensation. John Castellani, president of the Business

Roundtable, an association representing CEOs of companies

with more than $5 trillion in annual revenue, says

shareholders have always had the ability to enforce say-on-

pay by using the shareholder resolution process. That makes

legislation unnecessary, he says.

The pro-business U.S. Chamber of Commerce is also against

legislation. ``The decision to allow say-on-pay votes should

come, as it has, through a dialogue between shareholders,

directors and management, not via a Washington mandate,''

says Tom Quaadman, the chamber's executive director for

capital markets.

CEOs' arguments against it

CEOs say the legislation would open the door to

micromanagement by largely uninformed shareholders, who

understand neither the competitive market forces that drive

executive pay nor the complex incentives designed by experts

to get the best results. The law could drive top talent to

private companies and injure the ability of U.S. companies to

compete in a global market, they say.

``You cannot run companies effectively through the

democratic process of voting on all things,'' says Judy Odom,

former CEO of Software Spectrum. ``Independent boards should

be elected, and they should do their jobs.''

While most shareholders are uninformed, some are so

informed that they could use a say-on-pay law to an unfair

advantage, says Andrew Puzder, CEO of CKE Restaurants, which

operates Carl's Jr. and Hardee's. For example, certain

investors could threaten to vote ``no'' on the CEO's pay to

coerce the CEO into making decisions for short-term gain,

such as delaying capital investment or taking on unnecessary

debt. Such tactics could temporarily boost the stock price to

the detriment of the company's long-term health, he says.

An argument could be made that CEO pay is excessive and

does not drive performance, says Anders Gustafsson, CEO of

publicly traded Zebra Technologies, which sells printing

services to 90% of Fortune 500 companies. But he says CEOs

have a significant impact on company performance and are

being unfairly targeted in a bad economy because their pay is

publicly disclosed.

CEOs are not unanimous in their opinions, even where it

comes to pay. Patrick Byrne, CEO of Internet retailer

Overstock, says he is more concerned about CEOs influencing

boards than shareholders influencing CEOs.

``The CEO is hired by shareholders. He works for them, just

like a farmhand works for the folks who own the ranch,'' says

Byrne, among the CEOs who support say-on-pay legislation. He

says CEOs ``capture'' their boards, leaving shareholders

unrepresented.

Real estate developer Don Peebles, recently named by Forbes

as one of the 20 wealthiest African-Americans, also supports

say-on-pay. He says CEOs who have no significant ownership

often have compensation packages designed to reward them on

the upside, but they suffer few consequences on the downside.

``There is no real alignment of interests,'' Peebles says.

But Behar says he has served on eight boards and says

directors are not stupid, and they are in control of CEOs.

``How will our country be better off if CEOs earn less than

$2 million a year?'' says Behar. ``Are we trying to create a

country without the opportunity to get rich? We had better be

careful about the buttons we push down. We may not like the

ones that pop up.''

Mr. Speaker, I offer an amendment.

I yield myself 1 minute.

At the markup, the gentleman from Georgia (Mr. Price) offered an amendment, which I said we would be willing to accept subject to some further change. We've talked. We have not yet reached agreement, and this is going to be an entirely legitimate debate.

What the gentleman was concerned about, and I think legitimately, was the possibility of a callback; that is, a requirement that people give back bonuses they'd already received. That would be arbitrary. Now, we hope that there will be rules adopted that will set those rules in place, and I agree that there should not be people's pay subjected unreasonably to arbitrary retroactive decisions.

But there was--and I was not aware of it at the time--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 appeared to be, that a return of the money that was given because of the profitability might be appropriate. So our language reflects that. It does not overturn that SEC decision. It does give some protection against arbitrary return.

I reserve the balance of my time.

How much time remains?

Who has the right to close, Mr. Speaker?

Mr. Speaker, I yield myself 30 seconds to acknowledge one thing that should have been drafted better. The word ``require'' is ambiguous here. The word should have been ``permit'' rather than ``require.'' That is, we did mean to say that you could not require the individual to give it back. We do want to restrain the SEC or anybody else from an inappropriate one. We will try to change that one word, and it will make a difference to the gentleman of Georgia, but I believe that ``permit'' would have been more appropriate. When we say ``require,'' we mean that you could not require the individual to give it back. That was it.

I now yield 2 minutes to the gentleman from North Carolina (Mr. Miller).

Mr. Speaker, if the gentleman is going to close with his remaining time, I will just take, I think, 15 seconds to say that I've talked to the gentleman from Georgia. Again, we will still have a disagreement, but instead of ``require,'' it should say-- and he and I have agreed within the limited version here--``allow'' them to require it. In other words, we don't want the SEC to be able to make an inappropriate requirement. So that will be clarified.

I will take our remaining time to say, yes, we did tentatively agree to it. There had been an SEC decision that day, which I wasn't aware of, and I did believe that the amendment as we originally agreed--and I did say to the gentleman that I thought we would want to make some further changes.

Yes.

I would ask unanimous consent, if that is permissible--we are in the whole House--to change line 2. Instead of ``require,'' it will read ``shall allow to require,'' ``shall allow the SEC to require.'' No. I take it back. Here is how I will say it: ``Shall be allowed to require.''

That's easy for you to say, Mr. Speaker.

Mr. Speaker, if the gentleman would yield to me, I would ask unanimous consent to amend the bill according to that language which the gentleman has seen.

Mr. Speaker, I yield 4 minutes to the gentleman from California (Mr. Sherman).

I yield myself 3 minutes.

First, I had been taking as given that the President's press secretary said he had some problems with the bill. I know Mr. Sperling did, and as I said, we have the Republicans in a temporary mode of obedience to the President. A little bit of a culture gap there. They thought it was still George Bush. They are used to snapping to attention for President Bush. Apparently, a little of that left over for President Obama. I think we should have been independent in both cases.

I read the transcript of the press conference. Mr. Gibbs said nothing negative about this. He was asked if he would sign this bill. He said, Well, there are some pieces of it we are moving and it will go through the Senate. And when he didn't fully answer it, he got a tough follow- up question about whether or not they were trying to avoid spilling beer on the President's children's table.

I do also want to talk about say-on-pay, which the Republicans are now embracing.

Here's what the gentleman from Alabama, the ranking member of the committee, had to say as a prediction when we debated this in March of 2007:

Evidence that free-market forces are already at work to correct any excesses in the system should give this committee real pause before it seeks to impose a legislative fix that could, like past efforts in this area, have unintended and negative consequences.

In March, well over 2 years ago, the gentleman from Alabama confidently predicted that free-market forces are already at work to correct pay excesses. So apparently the gentleman from Alabama was correct, there have been no pay excesses in 2\1/2\ years. We've all been hallucinating. He was wrong then, and he's wrong now. Now they're wrong on different levels. They've now had to acknowledge the importance of say-on-pay.

I also would repeat when I say the Republicans have no version. They want to weaken say-on-pay, but with regard to the bonus structure that gives people an incentive to take risks because the decision-maker is risk free, even though the company is at risk, the Republican position is zero. There has not been in any of our deliberations any Republican approach to how you deal with the incentive to take excessive risk. No way, no how.

They have reluctantly agreed to say-on-pay, although they want to water it down, and that's to the argument that an annual vote focuses you short term. Of course not. There is an annual proxy vote. It goes on the proxy. It doesn't require you--if you've got a 3-year contract, then every year it would still be approved.

So this notion that it focuses on the shorter term is, of course, wholly inaccurate because it simply says you put it on the proxy every year. Some companies will have annual contracts, some biennial, and they are voted on. And if they are triennial, there is nothing at issue.

But again, the central point is this. The purpose of this amendment-- there are two. We can say on paper but more importantly have the Federal Government say nothing whatsoever about the bonus structure. Those financial institutions that received TARP money and paid it back and now want to do these bonuses in ways that will recreate the risk will be entirely free to do so under this amendment.

Mr. Speaker, just briefly, the gentleman talked about the bailout of General Motors and Chrysler which, of course, was under the Bush administration. The fact that the Bush administration decided to initiate a bailout of General Motors and Chrysler is not binding on this legislation. They are not under financial regulators and wouldn't be covered under this bill.

I now yield 3 minutes to the gentleman from Georgia (Mr. Scott).

Mr. Speaker, I will take 30 seconds to say, apparently the gentleman from Alabama only has witnesses if he's sure he will agree with everything they've ever

said. He says it's ``man bites dog'' because we had an honest witness with whom we agreed in some parts and disagreed on others. Apparently, the notion of having a witness that you haven't totally vetted for everything she's ever said is new to the gentleman from Alabama.

I will continue to invite witnesses that I think are useful, even if I don't always agree with them. And I would repeat that the gentleman from Alabama's say on this--he was against say-on-pay. He says it's just not much, but it was enough for him to say it was going to cause real problems 2\1/2\ years ago. And I repeat his view on pay, in March of 2007, Evidence that free market forces are already at work to create any excesses should give this committee pause, but seeks to oppose a legislative fix that could have unintended and negative consequences. He was talking about that insignificant say-on-pay.

I yield 1 minute to the gentleman from Indiana (Mr. Carson).

Parliamentary inquiry.

Did the gentleman not notice that Mr. Price had the right to close because he was defending the committee on the amendment that I offered?

I yield our remaining time to a leading member of the committee, the gentleman from Colorado (Mr. Perlmutter).

Let me reserve the right to object.

Members want to get out of here. I cannot be responsible for keeping Members here.

Apparently there is an effort--I don't think we ought to keep everybody in the dark about all this. There is apparently an effort to negotiate a unanimous consent agreement involving another bill, so they are asking us to delay this. I am perfectly willing to do this as long as people know it's not our fault. We were ready to get finished. There is a bipartisan leadership request that we wait another 10 minutes. I am perfectly prepared once people understand that, but I do think this kind of whisper-whisper, nobody will know is not a good way to go, so let's be honest about it.

Mr. Speaker, I reserve my time. I have, at most, one further speaker.

Mr. Speaker, I yield myself 5 minutes.

First of all, let me emphasize when the gentleman from New Jersey says ``trust the shareholders,'' that's a conversion. We are born-again shareholder advocates, because in 2006 when the Republicans controlled this institution, they would not even on the Financial Services Committee allow it to come up. We had a petition under the rules for a hearing. Then we asked for a markup and they refused it.

Then in 2007 the gentleman from Alabama, the gentleman from New Jersey, and the others, they all opposed say-on-pay. The gentleman from Alabama told us in 2007 that the free enterprise system was taking care of pay excess. He said that in March of 2007. All of the problems that we've had with pay in the interim apparently were figments of our imagination. The gentleman from Alabama had such confidence in the free enterprise system 2\1/2\ years ago, he told us they weren't going to happen. And say-on-pay now, oh, it's not a big deal. It was a big enough deal for them to oppose it.

By the way, let me say to the gentleman from New Jersey, here's the problem: No, it's not so much conscious acts of deregulation as nonregulation. What happened was new things grew up in the economy, particularly in the area of subprime mortgage and the way of packaging them and sending them around. And some of us in the minority wanted to change it. There were party differences.

In 2004 my friend from North Carolina (Mr. Miller) who was here earlier, he spoke with people at the Center For Responsible Lending in North Carolina who told us in 2004 trouble was coming. By the way, trouble was coming because of an excessive encouragement of low-income people to buy homes, not from the CRA and not from liberal Democrats, but from the Bush administration. The gentleman from Texas (Mr. Hensarling) inserted an amendment which we adopted. In 2002 the Bush administration sped this up. In 2004, over my objection among others, the Bush Administration directed Fannie Mae and Freddie Mac to substantially increase the number of subprime mortgages they were buying and for people below income. That's in the amendment that Mr. Hensarling offered that we adopted.

And some of us saw the problem at that point. I hadn't seen a problem with Fannie Mae and Freddie Mac before, but I did in 2004 become worried. I joined the gentleman Mr. Oxley in trying to pass a bill, although I had a housing problem on the floor. The gentleman from Alabama voted with Mr. Oxley and many others did. Other Republicans thought Mr. Oxley was too soft, and we then got into an intra- Republican dispute on Fannie Mae and Freddie Mac where the House passed the bill, the House under the Republicans, supported by the overwhelming majority of Republicans, every amendment offering to toughen it up rejected by an overwhelming majority of Republicans.

And the Republican Senate had a difference. Ironically, the Democrats in the Senate agreed with Mr. Oxley. The Republicans in the Senate agreed with Mr. Bush. No bill.

We also tried, as I said, to do something about subprime lending. The gentleman from North Carolina pushed for legislation. The gentleman from Alabama, to his credit, was somewhat interested in working with us on it. But the Republicans were overruled by the then-majority leader, Mr. DeLay, who used the rhetoric we're hearing today: keep the bureaucrats out of it and let the free enterprise system do it. That was the prevailing philosophy of the Republicans who ruled this House in 2004 and 2005.

So when some of us, including the gentleman from Alabama (Mr. Bachus), tried to work on legislation to restrict subprime lending, Mr. Bachus was even chairman of the subcommittee, and he was overruled. The chairman of the committee, Mr. Oxley, was told, No, we don't do that. We're Republicans. We believe in free enterprise.

So it was a conscious decision not to do anything about----

I yield to the gentleman from California.

No. I tell you, to the gentleman from California, he's going to have to speed up. I'm not going to slow down. But if he waits a couple of days, there's a very competent transcriber here. He'll be able to read it, and maybe we can even get it put into large type for the gentleman from California.

And now, the gentleman's having tried to interrupt me because that's what people do when they don't like what you're saying, I will return to the tale of how the Republicans told us not to do subprime lending. And we had legislation working. If we had been able in 2005 to get that legislation done, we could have retarded the depths of the crisis. So, yes, there were regulators who didn't do their job, but there were conscious decisions not to regulate.

There was a bill passed, by the way, in 1994 by a Democratic Congress, replaced in 1995 by a Republican Congress, which gave the Federal Reserve the authority to regulate mortgages of the kind that caused trouble. Alan Greenspan, supported by the Republicans in Congress, refused to use that authority. It was when he continued to refuse that some of us tried to do something. So, yes, that's where we got this, because a Republican commitment to never doing anything of the sort that they are talking about now that let subprime mortgages flourish.

In a few moments I'll be submitting an amendment to this bill, but before I do that, I just want to talk about someone else's comment on this bill. This is Nell Minow of the Corporate Library, someone who has been influential and involved in this issue for some period of time, as you may know, someone who no one would consider a conservative on this issue. And she just did a blog on this recently where she says, The House Financial Services Committee has recently approved this legislation. She recognizes why this is coming up, and she says, The impulse is understandable, but the standard is unworkable. What does inappropriate mean? What, while we're at it, does risk-taking mean? And the most terrifying question is, who gets to decide what they mean?

Chairman Barney Frank warned earlier this month, she reminds us, and he did so again just recently, that recent news of compensation of Wall Street shows that some financial leaders yearn for the stirring years of yesteryear, and demonstrates a need to adopt legislation on executive pay. But it's a question of empowering the shareholder to decide the question of appropriate level of pay and not by the regulators.

She concludes by saying, Who is in the best position to evaluate and respond to badly designed pay packages? As someone who is very proud of 8 years of serving in government, she says she has the most utmost respect for politicians and bureaucrats, but she also recognizes their limits. The government, therefore, should not be micromanaging pay. Instead, and this is what Republicans suggest, remove the obstacles that currently prevent oversight from those who are best qualified and motivated to manage the risk, the shareholders.

Mr. Speaker, I have an amendment at the desk.

I yield myself 4 minutes at this time.

Mr. Speaker, the American public truly should be outraged when they read the front page headlines nowadays with regard to bonuses and pay.

In The Wall Street Journal today, it's a bank bonus tab of $33 billion. You have to read the second headline, though, to realize that the $33 billion is going to the banks that received, basically, the taxpayer bailouts. The bottom line on all of this is that there is nothing in this legislation that would have prohibited this from going forward.

Now, the other side of the aisle on the floor today repeatedly says, Well, the Republican side simply has no alternative; it is just the party of ``no.'' Well, we know that that's not true. On the legislation before us today, with regard to executive compensation, both in committees and through Rules, the Republicans have proposed a number of substantive proposals, which I'll go through right now, which would address the underlying problems that we're trying to address here.

So, if you will permit me, I will now address the three or four main points in this substitute which would get at these points that, I think, outrage America with regard to compensation but which do so in a fair and just manner.

Firstly, in the underlying bill, it allows for a non-binding shareholder vote on executive compensation every year.

We propose instead that such vote should occur every 3 years. Why is that? All the expert testimony we've heard so far says that Wall Street focuses too much on the short term--on the year, on the 6 months, on the three-quarters or on the end of the quarter. Why then when compensation packages usually go longer than 1 year, usually go for 3 years, would we be requiring a vote that would once again refocus the attention on 1 year, a short period of time, as opposed to being in line with the 3-year longer time frame? So we suggest that a 3-year vote would be much more appropriate than a 1-year.

Secondly, as to the shareholders and whom we trust with these decisions, we suggest, if we are going to trust the shareholders to be making these decisions, should we not also trust them to make the decision as to whether or not to have such votes on executive compensation in the future?

So our amendment would suggest that a substitute would allow for a two-thirds vote of shareholders to opt out of the shareholder triennial advisory vote if they are so inclined. We know that this has been a position taken by a number of institutions and companies in the past because they've said that we do not want to have such power, that we do not want to involve ourselves in such decision-making.

We know that it is right now as well because we have a letter from the United Brotherhood of Carpenters which points out the very real reason of why this is. You know, they hold something like 3,603 different companies in their portfolio. They said if they were going to have to make this decision either every 1 year or every 3 years--and considering the due diligence that they would have to engage in--this commitment would be a severe challenge to their fiduciary responsibilities. So, if they want to opt out of this, shouldn't we give them that ability if two-thirds of the voters decide to do so?

Thirdly, State law. The other side of the aisle speaks about State law and about hypocrisy on this issue. Should we be preempting State law in this situation or, as to those States that have already engaged in this area, should they not be able to speak up and have their voices heard and not be preempted by the Federal Government?

Fourthly, and most importantly, is section 4. This section goes well beyond what the administration has already talked about. The administration says they do not really like what this section is in the bill and that they did not propose this section.

So our substitute says that we should be deleting section 4 of the bill, which would allow government bureaucrats rather than shareholders. The bottom line on this one is: Who is it that the other side really trusts to make these decisions? Is it the shareholders, as we saw in the first three sections of this bill, who would make the decisions, and that we would suggest they should be in the position to make the decisions, or is it the bureaucrats whom they think should be able to make these decisions? Is it the same bureaucrats, in the past, over at the SEC, who totally missed the whole Madoff situation, who should be making decisions as opposed to the stockholders? Is it the same bureaucrats who were the regulators for AIG and who totally missed that situation? Is that who they trust instead?

So we would suggest all four points are substantive amendments to this, and we would appreciate their consideration.

I reserve the balance of my time.

I yield 3 minutes to the gentleman from Texas (Mr. Neugebauer).

I am pleased to yield 3 minutes to a leader

in advocating for those free-market principles that made this country as great as it is, the gentleman from Texas (Mr. Hensarling.)

I yield 2\1/2\ minutes to the ranking member, the gentleman from Alabama (Mr. Bachus).

Mr. Speaker, may I inquire as to how much time is remaining and who will be closing?

Parliamentary inquiry.

As far as the procedure for determining who closes, is it not the author of the amendment?

I yield myself the remaining 3 minutes.

Mr. Speaker, the final question, I guess, is who do we trust. Who do we trust to deal with the situation of pay?

The gentleman just spoke on the floor with regard to protecting the interests of his constituents. You know, it doesn't really matter who your constituents are, whether they are the CEO at the top of the ladder, someone in between, the receptionist, anywhere along the line as far as pay scale, this bill will affect them and will affect their ability as far as what their compensation is. It will affect the ability of the Federal Government to dictate what their compensation will be. Government bureaucrats will be making those decisions in the future as opposed to the people involved with the company. Large income or small, bureaucrats will be the ones at hand to make those final decisions.

The odd thing about this legislation, as we read through it and as you look at our amendment to try to address this problem, is that the underlying bill gives with one hand and takes with the other. As has been previously indicated, it gives with one hand in a tacit approach to say that the shareholders should be able to make these decisions, but then it takes that right back again when it says, then, When the government decides that those shareholders made an incorrect decision, some bureaucrat at the SEC or the Federal Reserve or someplace else will overrule that decision and take that power away from them.

It says in the committee, on the one hand, that States should have some say in some aspects of financial service regulation matters, such as with the VFPA, where they do not want to preempt State rights, but here they want to step in and preempt those States, States that may have had a long history of dealing with such situations as executive pay compensation, or States that may want to address it in the future, but the underlying bill says that they will preempt that.

That is why we have come up with an alternative. We have come up with a solution. We are not the ``party of no,'' we are the party of reform, a party that says we should address this on a longer period of time, a party that says that we should allow the shareholders to be able to decide these issues, a party that says that when it comes to compensation, the Federal Government should not be intermeddling.

Now, there was an article in The New York Times recently. It quoted from Alan Blinder, a Princeton economist and former Vice Chairman of the Fed who wrote recently for the Wall Street Journal with regard to this. He said, The executives, lawyers, and accountants who design compensation systems are imaginative, skilled, and definitely not disinterested. Congress and government bureaucrats won't beat them at their own game. Congress has tried to do this in the past when they set the issue with regard to deductibility for executive compensation at $1 million. It had the unintended consequence of setting $1 million as the floor, and Wall Street then went from compensation packages greatly exceeding this. We may well see the same thing with this underlying legislation as well.

In the headlines that I started the hour out with, Bank Bonuses $33 Billion, money that is actually coming from the very taxpayers who are watching us here right now, this underlying legislation will not change that. Despite the fact that the gentleman from Texas tried to limit this legislation to try to address this legislation to situations as TARP companies, this legislation will not solve this. Our substitute will.

Our substitute will return the power to the individual. It will return the power to the corporation and, most importantly, return the power to the shareholder and take it from the government bureaucrat.

Can the Chair indicate how much time is remaining?

Yes.

I yield myself such time as I may consume.

I appreciate the gentleman from Massachusetts for working with the respective parties in order to ameliorate any situation that is going on outside of this area. And just as the gentleman says, it's nothing on your side of the aisle in the Chambers today at fault, and I guess we would say the same thing for those who are sitting here right now as well.

I left my last comments with the question of who do you trust and what do we need to do in order to address this situation. I will step back from that for a moment to look to the larger issue here that we are trying to uncover.

I commend the gentleman for the number of hearings that we have had over the last several weeks to try to delve into the various matters that dealt with the fiscal crisis we are currently facing in this country.

One of the takeaways, though, that I have had from those myriad of hearings that we have had is that the underlying concern of the Members of the House on both sides of the aisle is to try to get at the root cause of what was it that actually brought us to the current financial situation that we find in this country today.

We have heard a number of experts from think tanks, from Wall Street, from across the country expound upon where they believe what the underlying cause was. We have heard some who said it was with regard to GSEs, Fannie Mae and Freddie Mac, the fact that there was excessive leverage there allowed this to occur. There was someone who just spoke on the other side of the aisle who is in the chair right now who said that it was all due to deregulation, although I always raise the question whether or not they could cite those specific actions by Congress of deregulation other than the issue of Gramm-Leach-Bliley with regard to deregulation. And we have heard other areas as far as excesses both by government and Wall Street.

But through all those debates, I have yet to recall anyone who could provide any factual evidence, any factual proof, other than just their opinion, that the underlying cause was because of excessive pay by various corporations in this country. No one, certainly, brought up the idea that the problems that brought us here were due to excessive pay outside of the financial sector. So then we have to look at the underlying legislation and answer the question, what is it we are trying to get to here?

In the major portion of the legislation, which goes to allowing shareholders' rights to vote with regard to executive compensation outside of the financial sector, no evidence whatsoever that that brought us to the situation. So we ask why is that even in the underlying bill?

Now, we do try to attempt to reform it, inasmuch as that is all we can do at this point, by putting on a 3-year extension as opposed to a 1-year period of time. We also tried to reform their idea to say that States that have already looked into these issues should have the prerogative to continue with their legislation, that they are more knowledgeable, they have been more engaged, they follow the trends more in their States in their corporations in this area.

So we tried to reform and improve the legislation in that area as well. We also tried to reform it in a last way to say that, for those corporations that say that we have looked at this situation, our shareholders have digested the information and realize it would not be to the benefit of the corporation or the shareholders themselves, and over two-thirds of those shareholders say that they do not want to engage in setting pay but rather would allow it to return to where it has always historically been in this country, and that is by management and by the directors, we put that in the legislation as well.

But, still, the underlying bill takes all those powers away from the shareholders, from the management, from the directors, and it does so without any evidence that they were at all a cause of the problem.

Now, section 4 does, arguably, go to financial institutions, and it goes to those institutions that, arguably, could be, some would say, a cause of our current situation. But we already had regulation in place for most of those financial institutions. We already had regulators who were supposed to be doing their job. We had regulators over at SEC with regard to the Madoff situation. And, unfortunately, we know all too well they failed in that job. Despite the fact that there was testimony that evidence was presented to them, handed to them, documenting why that Madoff situation was out there and why the SEC should be involved, the regulators missed it.

We saw it as well with regard to regulators missing it over at AIG as well. Those regulators had authority to regulate those institutions as well, but did they do so? No. They missed it completely with regard to the whole AIG situation.

Now, the other side of the aisle seems to say that that was then and this is now, that the same regulators who missed Madoff, the same regulators who missed AIG, the same regulators who missed executive compensation and other problems in the past, now, all of a sudden, we are going to expand it even further and say we are going to give those regulators even broader authority for financial institutions, however they may be defined in the future, because this bill realizes that it may be expanded further. They now entrust those regulators.

We would conclude that we should trust the shareholders, the American people, more than we should trust the bureaucrats.

Mr. Speaker, I demand a recorded vote.

Mr. Speaker, I rise in opposition to this legislation and yield myself 5 minutes.

Mr. Speaker, the American people are rightly disturbed by almost daily reports of so-called ``too big to fail'' corporations that have received billions of dollars in government assistance and have, at the same time, paid their employees billions of dollars in bonuses.

In response to those events, Republicans have introduced legislation which gets the American people out of the bailout business--that, Mr. Speaker, is our response--and prohibits the government from picking winners and losers. We believe that's the solution.

The legislation we have introduced clearly establishes a structure where failure is not rewarded and market discipline is reestablished by placing responsibility for those who engage in risky behavior squarely where it belongs, on the risk-taker, not the taxpayer. That is the Republican response.

The Obama administration takes a different approach. It continues to embrace the ``too big to fail'' doctrine. That's why we're here today. That's why we have to address executive compensation. It appoints a pay czar to oversee compensation at the growing list of companies receiving taxpayer-funded bailouts and guarantees.

Despite growing public outrage over these companies dishing out billions of dollars in government-enabled bonuses, the Obama administration and the Democratic congressional leadership steadfastly refuses to embrace Republican legislation or offer its own proposals prohibiting further taxpayer bailouts. Instead, it says that these same corporations are simply too significant to allow them to fail, which not only enables but encourages these same corporations to continue what the Obama administration concedes is more risky behavior.

One of the behaviors that the administration and Chairman Frank identify as risky in these systematically significant corporations is executive compensation. Today we are presented with a fix, a legislative response to these bailout bonuses and the resulting public outrage. The cure-all solution bears the lofty and noble title Corporate and Financial Institution Compensation Fairness Act. It is in every way up to the challenge laid down by our former colleague, Mr. Emanuel, most recently of 1600 Pennsylvania Avenue, who said, ``Never let a crisis go to waste.''

It is also in many ways closely akin to the recently departed cap- and-tax legislation and the ever-looming government, or should I say public option, health plan. All three are sweeping power grabs into the private sector under the guise of the government's riding to the rescue. All three rely on the government to fix the problem. All three promise to fix the problem, which to a great extent was caused by guess who? That's right, the government and lack of regulation by the government. All three will create, or more accurately duplicate, large government bureaucracies. All three represent ill-advised and in many cases incompetent government intrusions.

Just 3 weeks or 4 weeks ago, Gene Sperling, legal counsel for our Secretary of Treasury, warned, Go slow. He said this is a very difficult subject. It needs testing. It has potential for unintended consequences. Just yesterday before the Senate, the White House press spokesman Robert Gibbs stated that the Obama administration is concerned that the chairman's legislation may give the government regulators too much say on incentive-based compensation. But as the chairman said to the Rules Committee, My legislation goes beyond what the Obama administration has proposed.

Now, if that doesn't take your breath away, nothing will.

In some ways this legislation borders on the classic ``bait and switch.'' It's being sold as giving the owners of the corporation the right to set pay and compensation standards. That's the shareholders. Chairman Frank just this week on CNBC said, Dollar amounts are for the shareholders to decide. It's up to the shareholders.

I yield myself an additional 2 minutes.

At the markup of this bill, he said say-on-pay empowers the shareholders, and that's where questions about amounts would come in. True, the first 6 pages of the bill give the owners, the shareholders, a non-binding vote on the pay of top executives. But then come the next 8 pages, the switch, which gives the regulators the power to decide appropriate compensation for not only just top executives but for all employees of all financial institutions above $1 billion in assets and all without regard for the shareholders' prior approval. So under the guise of empowering shareholders, it is, in fact, the government that is empowered.

One lesson we have learned from the government's arbitrary interventions over the past 18 months, and that is the converse of ``too big to fail'' is too small to save, which, of course, is the designation which applies to 99.9 percent of businesses, which have been deemed by this administration and the regulators as ``systemically unimportant or insignificant.'' But not so unimportant, not so insignificant to be totally ignored. While not significant enough to receive a bailout, they are apparently worthy of increased regulation in the form of government-mandated pay regulations and new disclosure requirements in the chairman's bill.

And, finally, on page 15, the bill designates those same government entities which are empowered to control compensation plans that would threaten the safety of financial institutions or adversely impact economic conditions or financial stability to oversee this riskiness. Look over the list and see if it inspires confidence.

I yield myself 1 additional minute.

These are the same government agencies that regulated AIG, Countrywide, and collectively failed to prevent the worst financial calamity since the Great Depression. If it took them 30 years to catch Bernie Madoff, do you really think the SEC can do a better job of identifying inappropriate risk than the vast majority of financial institution executives whose businesses have remained solvent during these challenging times? Really, now, is there any question who is better qualified or, for that matter, who ought to be responsible for setting compensation within an American corporation?

In closing, Mr. Speaker, this bill continues the Democrat majority's tendency to go to the default solution for every problem: create a government bureaucracy to make decisions better left to private citizens and private corporations. That's what we did in cap-and-trade. That's what we did in the health care proposals. And it's this bill on executive compensation. Government bureaucrats do not know what's best for America.

For those reasons, Mr. Speaker, I urge opposition to this legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentleman from South Carolina (Mr. Barrett).

Mr. Speaker, I yield 2 minutes to the gentleman from New Jersey (Mr. Lance).

Mr. Speaker, I yield 4 minutes to the gentleman from Texas (Mr. Hensarling).

I yield the gentleman 1 additional minute.

Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr. Campbell).

Mr. Speaker, I yield 3 minutes to the gentleman from Delaware (Mr. Castle).

Mr. Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. Price).

Mr. Speaker, let me tie up a few--what I consider loose ends about this legislation. One is the motivation. Of course we've heard that one of the motivations is that these pay schemes and arrangements could heighten risk; and then if one endorses the Obama administration approach, that would precipitate a bailout because the government would continually have to assure against some outsized risk. As I have said, the Republican approach is, simply don't bail these companies out, and then you don't have to be micromanaging every compensation decision by a company. I think there's another motivation, and I think it is a slippery slope. Chairman Frank was on CNBC this past Tuesday, and he asked this question: is there some character defect with some people where they get hired, they give them a prestige job, but they really won't do it right unless you give them an extra bonus? Most of us don't need that.

So I'm wondering if one motivation for this legislation is so that the government can decide whether people need a bonus or don't need a bonus, whether they're deserving of a bonus. In fact, several pages of the bill does just that. Some people may not need that bonus. Other people may. That decision will be made by the list of government entities on page 15, not by the shareholders even though this bill is trotted out as a shareholder bill, not by the board of directors, not by the management who an important tool of management is to offer incentives and to incentivize performance and achievement. But apparently now it's the government who will decide whether you need a bonus or not. That, Mr. Speaker, is scary in my mind.

I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentleman from Illinois (Mr. Roskam).

Mr. Speaker, at this time I would like to recognize the gentleman from New Jersey (Mr. Garrett) for 1\1/2\ minutes.

Mr. Speaker, it appears as if this bill is so much more than a shareholders' right to say-on-pay bill. We already have a czar, a pay czar. Are we going to have a consultant czar? You know, we're going to enable these compensation consultants, they have to go to the agencies, they meet certain criteria. Are we going to have a consultant czar? Are we going to need management czars? Are we going to need risk czars? Because these 20 pages--and 15 of it deals with risks. It deals with inappropriate behavior.

Are we going to, on the bonuses, are we going to have every bonus submitted to some government agency to review? How are you going to report those bonuses? How are you going to approve those bonuses? How long is it going to take to approve those bonuses? The administration, itself, has warned that this bill goes too far. Independent witnesses have warned that this bill goes too far.

Mr. Speaker, we continue to hear this mantra that this is all about shareholders and empowering them with rights, but then you sort of give them a crumb, you give them a non-binding right to have a vote on pay and then you follow that up with 12 or 14 pages where you give the government all sorts of powers, powers to regulate pay bonuses. And you do that, you give the shareholders the right to have a non-binding say on the top executives, but then you give the government, in the back door, the last 15 pages of the bill, 14 pages, you give them the right to set the pay for every rank-and-file employee. And you also do it under the guise that these companies are so big and so systemically important that they may fail. And that's right, they may. But then you do all the other 99 percent of the companies that aren't going to fail.

Now, Chairman Frank, last month, invited, I think, one of his favorite witnesses, Nell Minow, who is a leading shareholder rights advocate, to testify on his say-for-pay bill. And she came and she testified favorably. And then he added this government say-on-pay, where the government will make the decisions. Well, just yesterday, we had what we call a ``man bites dog'' moment. She came out and she posted this on her Web site. She now opposes, vehemently opposes, section 4 of the bill, the government say-on-pay.

She states, The standard is unworkable. What does inappropriate mean? Boy, I agree. Deciding whatever bonus or whatever incentive pay or whatever commission is inappropriate. She asked the same question that we asked, Who is in the best position to evaluate and respond to badly designed pay packages? Here's her answer, the entire answer: ``I have the utmost respect for politicians and bureaucrats, but I also recognize their limits. The government should not micromanage pay.''

And that is what this debate is about: Are you going to let the government do it, the board of directors do it, or are you going to let the shareholders do it? Obviously, you go to the default position that you went to on health care, cap-and-trade, and now financial services: Let the government decide.

Mr. Speaker, I rise today in strong support of H.R. 3269, the ``Corporate and Financial Institution Compensation Fairness Act of 2009''. I would like to thank my colleague Representative Barney Frank for introducing this resolution, as well as the cosponsors.

I stand in support of this important resolution, because it is designed to address the perverse incentives in compensation plans that encourage executives in large financial firms to take excessive risk at the expense of their companies, shareholders, employees, and ultimately the American taxpayer--risks that contributed to the recent financial collapse.

One of the solutions it offers is practically the manifestation of common sense itself--let the stockholders of the company, the people the corporate executives are supposed to be working for, have a say in how those executives should be compensated. For example, the bill requires shareholder non-binding votes on so-called ``golden parachutes.'' It requires publicly-traded corporations to allow shareholders to take non-binding votes during annual meetings on the top five executive compensation packages. And it allows SEC to exempt small companies from the nonbinding vote requirement if it finds such an exemption necessary.

The bill also seeks to change the incentives for the sort of financial firms that brought our economy to the brink of collapse, so that those who manage the money of our countrymen are not even tempted to take us back to that precipice. The bill authorizes the SEC, along with the federal financial regulatory agencies, to develop regulations for financial firms with at least $1 billion in assets that proscribe the use of employee compensation structures that pose a risk to financial institutions and the broader economy. It also specifically, authorizes the regulations to restrict or prohibit ``inappropriate or imprudently risky compensation practices'' at these large financial firms, and further requires financial firms with at least $1 billion in assets to disclose to the federal regulators any compensation structures that include incentive-based elements.

The bill does not require disclosure of any individuals' compensation information; nor does it allow government pre-approval of anyone's compensation. Rather, the bill is the first step towards enacting comprehensive financial regulatory reform to make sure we never face another historic financial crisis that depletes the retirement savings of millions, locks businesses out of much-needed credit, and threatens the entire economy.

Finally, the bill requires the compensation committees of the Boards of Directors of public companies to be made up of independent directors. It further requires that these compensation consultants satisfy independence criteria established by the SEC. I would also point out that this bill will, in practice, only apply to companies already sufficiently large enough--it specifically allows the SEC to exempt small companies from the non binding vote requirement if it finds such an exemption necessary.

Not only is this bill common sense personified, it is also long overdue. Corporate culture has, in the past three decades, undergone a transformation for the worse, where the most economically powerful have come to see, not just stockholder profit, but short term profit, as the greatest good. Today, the people with most economic influence see little or no incentive in seeking anything but the next bonus.

It was not always so--from the end of World War II until the mid 1990s, prominent public and private company CEOs almost universally viewed their responsibilities as being equally split among shareholders, employees, customers, and the Nation. This broad sense of corporate responsibility was actually so widely

and comfortably held that in 1981, the Business Roundtable, which is the key public policy arm of the Nation's largest public companies and their CEOs, officially endorsed a policy that said that shareholder returns had to be balanced against other considerations.

However, just as the Business Roundtable was making its policy statement, the deregulation and laissez-faire era that was born in the Reagan administration was starting to chip away at the statement's core contention. And by 2004--even after many of the myriad scandals and outright thefts that have hallmarked the last decade of American business had already come to light--the Roundtable amended its position. It said that the job of business is only to maximize the wealth of shareholders.

But even that statement did not, in any meaningful way, restrict or amend their pursuit of personal wealth, as board members effectively wrote their own paycheck. So not only were our corporate leaders explicitly no longer concerned with stakeholders other than those with the bottom line, they saw little concern for the long term well being of their company. A well-connected man could just as easily make sure the short term profits were inflated as much as possible, so it would look like he was doing a good job, and jump off when the bonuses get handed out.

We see this behavior, for example, among the companies Americans entrust their health care with. In 2001, Aetna's CEO made $3.5 million; 7 years later, it increased nearly seven-fold, to $24.3 million, making over $100 million in the past 9 years. In 2000, Coventry paid its Chief Executive $2.2 million; apparently that wasn't enough; because in 2007 they gave him nearly $15 million. In the past 9 years, ten individuals--people who are in charge of companies, whose source of profit is the denial of care to the people who take large cuts in their paychecks to give them money--made over $690 million.

In 2007, several high profile corporate executives resigned and received multimillion dollar financial packages. That year, Home Depot CEO Robert Nardelli resigned and received a severance package worth $210 million, which followed several other ``golden parachutes,'' including the $122 million retirement package for Pfizer's former CEO, the $175 million package for KB Homes' former CEO, who retired after he was found to have manipulated the company's stock, and the $85 million severance package for Viacom's CEO who was on the job for less than a year.

That was the year our noble body tried to act. The House passed a bill that would have required publicly traded corporations, beginning this year, to allow shareholders to take a non binding vote on executive compensation and golden parachutes. Our colleagues in the Senate, however, never acted on the measure.

And, as everybody sitting in this noble body knows, the outrage has only grown. In 2008, one man--the head of a financial firm--made over $700 million. Another CEO, of the Oracle Company, made over half a billion dollars that same year. Six energy companies paid their CEOs nearly $800 billion. All told, in 2008, less than 10 individuals made over $2 billion, over 1 percent of the Gross Domestic Product of my home city of Houston.

During the worst days of the financial crisis, a raw nerve was struck when workers generally became aware, many for the first time, of the huge salaries being earned on Wall Street and on other streets far removed from Main Street. Wherever earned, excessive executive and CEO compensation, simply by being ``excessive,'' belies the principles of a meritocracy, which is what corporations should be. Managers rise to something akin to royalty when their compensation is at unjustified levels and when the rewards of employment are not more commonly and fairly shared with the general employee base.

To conclude: This regulatory overhaul is urgently needed to avoid the possibility of a repeat of the recent financial disaster which nearly crippled our economy. It does so through common sense measures to curb executive power to write their own checks, and dis-incentivizes them from taking the mad risks that nearly brought us to ruin. It is long overdue, and becomes only more necessary as time passes. And so I support the bill.

Mr. Speaker, I thank the gentleman for yielding.

There are aspects of this legislation that I certainly appreciate. All Americans have been outraged--it is a word we use frequently, and we use justifiably--about some of the compensation packages we have seen from failed companies that come with tin cup in hand to the United States taxpayer looking for more.

This bill has some provisions that add increased transparency, some increased accountability; and that is good. But, unfortunately, the bad in the bill way outshadows the good.

I have always said, Mr. Speaker, what you do with your money is your business. What you do with the taxpayer money is our business.

Mr. Speaker, unfortunately, you can't just read the bumper sticker slogan. You actually have to read the legislation. So we hear speech after speech about these failed institutions taking in all of this government money.

Well, I wonder then why in committee on a party-line vote did we vote down an amendment that I brought that would have ensured that the bailout recipients, that this legislation applied to them and them only. They are the poster children in this debate, yet the legislation extends potentially to every public company in America that somehow is defined as a ``covered financial institution.''

By the way, I would say to my friends on the other side of the aisle, the best way to deal with risky pay schemes is to quit bailing them out in the first place. My friends on the other side of the aisle are enshrining us as a bailout Nation. So you complain about the taxpayers picking up the tab. I have complained about the taxpayers picking up the tab. Quit bailing them out in the first place.

Again, we have to read the bill and not just read the slogan, because if you read the bill, what you find out is,

number one, this isn't just pay restrictions that go to those in the troubled Wall Street firms. Again, it is almost every covered financial institution. And guess what? If you read further into the bill, it doesn't just cover the top officers, the top executives. Every single employee, every single employee who has an ``incentive-based compensation plan'' could be covered by this.

We have already learned that somehow, with a very interpretive approach to the English language, General Motors and Chrysler have been found to be financial institutions. This means that any employee, any employee who receives a tip, a sales commission, a Christmas bonus, could have a Federal bureaucrat take it away from them. Ho ho ho.

That is what this legislation is all about. Again, don't get sucked in by the bumper sticker slogan. Read the legislation. That was the problem here on the original bailout. Nobody read the legislation. The government stimulus, nobody read the legislation. Well, fortunately, this isn't a 1,000-page bill. I think it is about 15 or 20 pages. I actually took the time to read it.

And if this is just about class warfare, Mr. Speaker, why doesn't this do anything about Hollywood stars who make $25 million for a movie, and yet the movie loses money? Why isn't it about a third baseman for the New York Yankees who gets $21 million and ties his worst record for striking out in the season? Why doesn't this have anything to do with the personal injury trial lawyers who make millions and millions, and their clients are doing good to make thousands?

So I hear the rhetoric from the other side of the aisle, which once again seems like a lot of recycled class warfare to me.

Another point I would make, Mr. Speaker, is we hear that we need this in order to somehow deal with safety and soundness. We need this legislation to somehow deal with systemic risk.

Well, number one, I listened very carefully to the testimony that was presented in our committee, and I am sure it is theoretically possible that there are pay structures that somehow may lend themselves to this. But, again, show me the evidence. Where is the evidence? When I look at pay structures among financial firms that failed versus those that didn't fail, I don't see the correlation.

Second of all, as we know, Mr. Speaker, the regulators have the power to regulate the liquidity and capital standards of these financial firms to make it commensurate with the risk. That is the remedy. That is the remedy, not to take Christmas bonuses away from employees.

Mr. Speaker, to quote the distinguished chairman of the Financial Services Committee, he was wrong then, he is wrong now to say that Republicans have no program to deal with excessive risk and compensation packages. Yes, we do have a program: end the bailouts. End the TARP program. If you quit bailing out risky behavior, Mr. Speaker, you receive less risky behavior.

Second of all, the gentleman is also wrong as far as the Republicans having no program otherwise we wouldn't have this substitute that we are debating at the moment. I also heard the gentleman from North Carolina earlier say, Well, we need to have the underlying legislation because shareholders have no right to have a say-on-pay. Wrong again, Mr. Speaker. Shareholders have the right. They can have a say-on-pay by electing directors who will fire the management. They have a say to invest elsewhere.

Their bill says we have to have mandatory say-on-pay. Now, we can debate the merits of it, but the gentleman from North Carolina was simply, clearly wrong.

I also want to say to my friends on the other side of the aisle, when I listen to, again, the logic that we have to have a new Federal regulation that somehow will regulate risky incentive pay structures, again, all of the rhetoric has to do with Wall Street. But guess what? Read the bill. Look at the interpretation.

Financial institutions. Chrysler and GM have been found to be financial institutions. We have had testimony when they came looking for the taxpayer bailout that the UAW, the United Auto Workers, had a pay structure that was 40 percent higher than their competitors.

So now we have a law here that will allow Federal regulators, I assume, to come in and say, Folks at the UAW, your incentive structure is contributing to the demise of Chrysler and GM. So we're going to have to come down and take down your wage rates.

Read the bill, Mr. Speaker. This isn't restricted to the top executives. And if anybody believes this is restricted to Wall Street, then why did Chrysler and why did GM get coverage under a statute that described institutions?

So, Mr. Speaker, what we have is a Federal Government that is now taking over our auto companies, telling us what kind of automobiles we can drive. They're taking over our mortgage companies, telling us whether or not we can even enjoy a mortgage. They now want to control access to our family doctor, and now they want to decide for millions and millions of Americans whether or not they can ever receive a sales commission or a Christmas bonus that they may view as too risky.

What is risky is too much politization of our economy. What is risky is too much government control of our economy. We have had enough.