Floor Statements

This bill does three things. First, it requires the issuance of regulations defining excessive and unreasonable compensation and applies them only to those who are holding our capital. As the Chairman pointed out, similar legislation is already law and was voted in favor of by the Republican leadership.

The bill we passed in October of last year specifically required the Treasury to issue appropriate standards for executive compensation--not for every company in America, but for those that are holding our money. Clearly, this new language will provide additional impetus for Treasury to issue appropriate regulations.

There are other things the bill does. First, it deals with excessive bonuses and the provision that Senator Dodd is now famous for having added to the recovery legislation.

As I think every Member of this House knows, Senator Dodd had a provision that he added--and he was prevailed upon to cause his provision not to apply to preexisting contracts.

Since then, those on the other side of the aisle have done two things that strike me as inconsistent. They have denounced Senator Dodd's amendment and the philosophy behind it, and they have denounced the fact that it doesn't apply retroactively to preexisting contracts. This is like announcing that you detest the taste of broccoli and complaining that you didn't get a double helping. It makes no sense except for those who simply want to find something to denounce.

This bill eliminates the exception that Senator Dodd has been so viciously criticized for by the other party. If you vote against this bill, then you are embracing the very exception that many of you have been vilifying.

Third, this bill has a disclosure provision that I authored. It says that companies that are holding our TARP money must disclose how many of their employees are getting a total compensation package of over $5 million; how many have a total compensation package of over $3 million; how many over $1 million. Why? Because if the American people are putting up the money, they have a right to know.

Now the self-styled ``defenders of capitalism'' say that we've got to protect these companies from the influence of the taxpayer. How is capitalism actually supposed to work? Those who provide the capital and take the risk are supposed to have some control. That's real capitalism. The taxpayers are taking the risk with these companies. We hope to get our money back. As soon as we do, the companies can operate as they will.

Instead, we're told that we need a kind of cancerous capitalism--a system that works like this: Socialism for the risks, capitalism for the rewards.

I don't think Adam Smith would have voted for the TARP bill. The gentleman from Alabama did. I voted against it. But I do think that economist Adam Smith--not our colleague from Washington--would vote ``yes'' on this bill because those who provide the capital should control--or have at least some control--of the enterprise. And that includes some control over compensation.

To say instead that firms should take our money but not listen to our ideas on how it should be used, that isn't

capitalism. That is socialism for the rich.

Mr. Chairman, I ask unanimous consent that the time on the amendment be extended on both sides by 30 seconds.

I thank the gentleman.

Mr. Chairman, I would point out that the amendment, as written, means that the bill does not apply to any company that has already received a TARP infusion of capital. It applies only to those who receive infusions of capital in the future. The Treasury Secretary has announced that he is not going to make any infusions of capital in the future. He is going to use the TARP money for a completely different program. So the effect of the amendment is to gut the bill.

I thank the Chairman.

I think a lot of us would like companies to repay the TARP money as quickly as possible. I think that's true of those who voted against the bill, and I think it's true of many of those who voted in favor of it. And I might support this amendment if it was one that required companies to repay in a 6-month schedule, or a 1-year schedule.

But this amendment allows companies to escape all the provisions of the bill just by entering into a schedule of repayment that could be a 10-year schedule or a 15-year schedule. And I don't think that a company should be able to escape the bill just by repaying us the money over the next 10 or 15 years. After all, all of the companies who got the TARP money are supposed to be repaying it; many of them in a shorter period than over the next 10 or 15 years.

Fairness would say that we should not treat a company that's repaying us over a 15-year schedule differently than a company that has not entered into a particular repayment schedule.

So I would hope that we would defeat this amendment because the amendment, as written, would allow a large number of companies to escape the effect of the bill without doing much more than making a few monthly payments, potentially of a very small amount.

As to the issue of retroactivity, there is much discussion over what happened in the Senate, but here in the House, we didn't vote for this version of the Dodd amendment or that version of the Dodd amendment. We just had the conference report before us.

Those of us who voted ``yes'' on the conference report at least voted for a provision that would prevent crazy bonuses in the future. And there are many Members--in fact, the entire Republican side of the House who voted against the stimulus bill. That means they voted against a provision that would prevent huge $6 million AIG bonuses in the future. And their only excuse is, well, they would have hoped for an amendment that would have prevented the bonuses in the past.

When a bill comes before us that would prevent $6 million bonuses from being paid to AIG executives in the future, and you vote against the bill, it is a very small fig leaf to say that you are nonetheless opposed to excessive bonuses.

Madam Speaker, this country is being treated to Kabuki theater in three acts. In the first act the American people are told, ``We feel your anger. We share your anger. You have a right to be angry at AIG and all the others on Wall Street that are bailed out.''

But in the second act, Wall Street nitpicks to death any practical proposal that would be adverse to the interests of Wall Street.

And then in the third act, we transfer a trillion dollars to Wall Street on very favorable terms. That is to say, terms that are unfavorable to the taxpayer, terms very favorable to Wall Street.

Now the first act is one in which those of us who are angry are told that we are blinded by our anger and therefore should not participate in the decision-making. Rather, that should be left to those who are blinded by their gullibility for Wall Street's demands and entreaties. We are told that those of us who are angry are stupid peasants with pitchforks and torches. We are told that it is wrong to be angry with the bonuses because that is just the tip of the iceberg, and it is wrong to be angry with the $170 billion we gave to AIG because that is too complicated to talk about.

The fact is AIG should have been in receivership; that would have voided its employment contracts, and we need to compare AIG to GM in just a second.

The second act is one where we nitpick to death any proposal that Wall Street disagrees with. We had a proposal to impose taxation on excess compensation, and we are told, ``Oh, we can't change the rules after the game.'' The fact is that this Congress has often passed tax laws a few months into 2009, or any particular tax year, that would affect the 2009 tax year or even prior tax years. We have done it repeatedly. We just never did it to Wall Street.

Finally, we go to the third act where we transfer a trillion dollars to Wall Street as part of this public-private partnership. Now how does that work? Wall Street puts up 6 percent of the money. They get 50 percent of the profits and 100 percent of the control. I would say those are terms very favorable to Wall Street. I am not blinded by my anger; but I am, indeed, angry.

Now let us compare how we have dealt with AIG and how we dealt with General Motors. Both entities need to continue to produce. The AIG insurance companies are relatively safe. They are State-regulated. They weren't part of the big disaster. The big disaster occurred at the parent company where they opened a casino and all of the guys on Wall Street and the powerful interests around the world went to the casino. They placed their bets. They bet against the mortgage market in the United States. They won and they broke the bank. And now they are being paid every penny they are owed, down to the last penny. How can that be done when AIG is bust? Simple, taxpayer money, $170 billion. Some of it, we put it into AIG, and tens of billions of dollars go to overseas banks within minutes.

How does that compare to the creditors of General Motors? General Motors owes its bondholders. It owes its retirees, and General Motors owes its workers. What is happening to what is owed by General Motors under these contracts? Those contracts are being shrunk. The bondholders are going to have to take about a third of what they are entitled to in cash. The retirees are going to get about half of what they are entitled to in cash, and the UAW has already made substantial changes in their union contract.

So with General Motors, there is either a bankruptcy, and I hope we avoid a formal bankruptcy, or there is, in effect, an informal bankruptcy. What is a bankruptcy? It is a reorganization process in which the company goes forward but its creditors have to take a haircut. They have to lose money. And all of the creditors of General Motors are losing substantial amounts, even people who worked their whole lives expecting retirement benefits and health benefits when they retired. They are taking major haircuts.

What about the rich and powerful that AIG owed money to? They are getting paid every penny. They demand it, and it comes from the American taxpayer. It is time that we respect the companies like GM that do work and make products. It is time that we not hollow out our manufacturing sector.

Mr. Speaker, yesterday Wall Street won three great victories. First, a plan was announced under which Wall Street puts up 6 percent of the money, assumes 6 percent of the risk, and takes 50 percent of the profits.

Second, the Senate announced that it was going to back burner the proposal to use the Tax Code to recoup the unjust enrichment received by certain executives on Wall Street.

And finally, the media continued its condescending drumbeat in which speaker after speaker in the media says the only proper approach is that one must denounce Wall Street, and then capitulate to Wall Street. And any of us who want to actually do anything that Wall Street disagrees with are just a bunch of angry peasants with pitchforks.

Well, let me say, anger is no vice and gullibility is no virtue, and faith in Wall Street is not the one true faith.

We have got to be willing to take action that Wall Street disagrees with and to deal with an establishment press which will then say we are governing out of anger. I am very angry, but I am not blinded by my anger. I am also not blinded by a gullible faith that whatever Wall Street does will be in the national interest.

First, let's take a look at this program where we put up 94 percent of the cash, Wall Street puts up 6 percent of the cash, but Wall Street gets 50 percent of the profit. You know with a deal like that, you could probably get Wall Street to buy lottery tickets for $3 a piece. They will put up not $3 a piece, but 6 percent of the $3, the Federal taxpayer puts up the rest, and then the winnings are split 50/50. Even if the average lottery ticket only pays out 20 cents for every ticket, that is a winning investment for Wall Street.

For us to give them half the profit while they take only 6 percent of the risk is a massive transfer of wealth from the American people to the hedge funds on Wall Street.

Second, let's look at this issue of bonuses and compensation. Now we passed a bill in this House last week that was imperfect. It was imperfect because it left alone million-dollar-a-month salaries, and it allowed any of the big Wall Street firms that were planning to pay multimillion-dollar bonuses to simply recast their compensation and call it million-dollar-a-month salaries, or raise them to $2 million a month, and the bill we passed would have no effect.

Third, the bill we passed last week, while it would deal with the AIG bonuses, did not deal with the Merrill Lynch bonuses. That is why today--and I hope to have some additional cosponsors before I introduce the bill--but later today, I will introduce legislation that will impose an excise tax that doesn't look at bonuses separate from the rest of the compensation package, but looks at the entire compensation package. It says if the package is over half a million dollars a year and you're working for a company that would be in bankruptcy right now if you weren't bailed out by the Federal Government, then in effect you are being paid that enormous salary with taxpayer dollars only because the taxpayers came through and bailed out the company that is paying you that money. And for that reason, we are going to insist that unless you want to face a major tax, you return to your employer all of your compensation in excess of half a million dollars. This is an approach that I think is fair. It is not punitive. It is not confiscatory. It simply takes from executives the huge amount of compensation that they received only because the rules of capitalism were suspended and their companies that should be in bankruptcy or receivership are instead operating independent of receivership and are paying salaries that exceed what should be paid to an entity that is dependent upon the Federal Government.

The bill will also provide that if the Treasury issues executive compensation regulations, people will be able to receive restricted stock without limitation.

So I look forward to getting additional cosponsors for my tax bill and responding to Wall Street logically and without gullibility.

I thank the gentleman from Florida for his remarks, where he refers to AIG as ``too big to fail.'' The latest from Wall Street is, well, it's not so much too big to fail, but too interconnected with the rest of financial institutions. ``Too interconnected to fail'' is the new line. The fact is this: AIG was too well-connected to fail. AIG should have been in receivership, but that would have disadvantaged the richest, most powerful interests in the world.

Now let us look at the new public-private partnership plan being put forward by the Treasury. It involves a thousand times as much money as AIG executives received in bonuses and it would make the American people a thousand times as angry, except for the fact that it is so technical that the American people may not fully understand it.

Here is how it's supposed to work. The taxpayer puts up 94 percent of the money. The taxpayer takes 94 percent of the risk that the assets purchased will end up being worth nothing. Ninety-four percent. And the taxpayer gets 50 percent of the profits. The private

Wall Street interests put up 6 percent of the money, maybe less, and they get 50 percent of the profits. What this will mean is that this new entity that's created, the public-private partnership, will go out and buy these extremely difficult-to-value assets. They're going to overpay for some. They're going to underpay for others. They're going to make money on some. They're going to lose money on others. When they make money, half the profit goes to Wall Street. When they lose money, 94 percent of the loss goes to the taxpayer.

These entities are going to be 94 percent government-owned and financed. At least we're putting up 94 percent of the money. AIG was 80 percent government-owned and when they paid a million-dollar bonus, the country was angry. Well, what about an entity that's 94 percent government-owned? You can be sure this entity will be paying out million-dollar salaries, million-dollar bonuses. I wonder whether the American people will focus on it.

What we have had is a circumstance where so far this government has transferred hundreds of billions of dollars of wealth to Wall Street. But all that money has gone to the big, well-known, publicly traded companies on Wall Street. Well, there is another important tribe on Wall Street, and that is the hedge funds. Now with this new program, we can transfer hundreds of billions of dollars to the right side of Wall Street and hundreds of billions of dollars of taxpayer equity, taking hundreds of billions of dollars of taxpayer risk, for the benefit of the left side of Wall Street. Apparently some people think that's what fairness is--massive wealth transfer to both sides of Wall Street.

Now last week we passed a tax bill. That bill has been criticized by Wall Street and the administration. But they've ignored the statements of Lawrence Tribe, the foremost expert on constitutional law, the professor at Harvard Law School, who outlines step by step why that law was constitutional. Now I had problems with the law because it had loopholes in it. It will allow the Merrill Lynch executives to keep their bonuses. It allows million-dollar-a-month salaries. And I will introduce tomorrow what I think is a much more comprehensive effort to say that those who work for bailed-out firms shouldn't get more than a half million dollars a year, that whatever they get in excess to that they ought to return to their companies, and I hope we will have some cosponsors for that bill. But it is very plain from Lawrence Tribe's analysis that the approach we took in this House yesterday is fully constitutional and that the flimsy constitutional arguments that are being made against it hold water only because they're repeated over and over and over again in somber tones by Wall Street and the establishment.

Let me give you another example. Congress, the Republican Congress in 1996, passed a 200 percent excise tax which is now law, and that excise tax falls on excess bonuses and excess salaries to executives, and it was retroactive, 6 months retroactive from when it was passed and it took effect 6 months earlier. Why does nobody know about this code section with a 200 percent tax on excess compensation? Because it didn't affect Wall Street, so it was not controversial. It affected those who received excess compensation from charitable organizations.

I look forward to working with my colleagues to pass reasonable limits on executive compensation and to make sure that the taxpayer gets more than half the benefits when we put up 94 percent of the equity.

Madam Speaker, I rise today to congratulate the California State University, Northridge (CSUN) men's basketball team for winning the Big West Conference title and earning a spot in the prestigious NCAA Tournament for the second time in its NCAA Division I history.

The Matadors reached this year's tournament by winning a hard-fought Big West Conference title game against University of the Pacific. The Matadors amassed an impressive 17-13 overall record and 11-5 conference record. CSUN led all team categories in the Big West Conference in scoring, rebounding, field goal percentage defense, 3-point field goal percentage defense, rebound margin, and steals.

The Matadors men's basketball team is led by head coach Bobby Braswell, Big West Coach of the Year for a second straight season. He is assisted by a talented and skilled coaching staff including Danny Sprinkle, James Blake, Ryan Dodd, Steve Grech, Bob Vazquez and Louis Wilson.

CSUN is a vibrant, diverse university community of nearly 34,000 students and more than 4,000 faculty and staff, sited on a 356-acre campus in the heart of Los Angeles' San Fernando Valley--a region of over 1.8 million people.

CSUN was founded in 1958 as San Fernando Valley State College and adopted its current name in 1972. Today, it is one of the largest universities in California.

Madam Speaker, I wish to congratulate the Matadors for winning the Big West Conference title and earning a berth in the NCAA Tournament. I am proud of their sportsmanship, athletic excellence, and winning spirit during the regular season, and I wish them all the luck in the NCAA Tournament.

Let me set the record straight, particularly with regard to the comments of Mr. Dreier from California. The TARP bill is the one that provided the bailouts. It contained highly ineffectual, giant loophole-containing limits on executive compensation.

Not surprisingly, those provisions did not prevent the outrageous AIG bonuses, nor do they prevent million-dollar a month salaries. It is the TARP bill which should have limited and pretended to limit executive compensation to those who got money from the TARP bill. The gentleman from California voted for the TARP bill, as I understand it. I voted against it, twice.

Then in January we considered a bill that had little or nothing to do with the TARP bailout. It, thankfully, included some effort to control bonuses. That was in addition to the restrictions found in the TARP bill. It was a step in the right direction, but it was not enough to stop AIG bonuses. To attack people for voting to make the TARP Program a little better, and to have those attacks come from somebody who voted for the TARP bill, seems just a little outrageous.

But what about the bill we are going to consider today? It's a good step, but it ain't going to get us where we need to go. Because the bill we will consider today allows for half-million-dollar a month salaries, million-dollar a month salaries, without any taxation, without any limitation, without any effect from this legislation, just as those million-dollar a month salaries were unaffected by the TARP bill and by the stimulus bill.

We need to come to this floor next week and improve the bill that I hope we pass today--to deal with all executive compensation, not just bonuses. Because if you think people are angry today at the AIG bonuses, you see how angry they get when we tell them we've solved the problem and then they find out some people at bailed-out firms are getting $500,000 a month salaries. Because they couldn't get bonuses, they went to the employer and said, Well, better make it $1 million a month.

We have got to deal with the entire compensation package.

The bill we'll consider today also allows unlimited commissions. Now, you could argue that maybe certain commissions shouldn't be limited. But if you don't define the word commission, you can be sure everybody on Wall Street will rename what would have been a bonus into a commission. And it will not be taxed under the bill we are going to deal with today.

I thank the gentlelady. Finally, the bill we are going to deal with today deals only with executives of firms that have received capital infusions of over $5 billion. That means that they got $5 billion and they sold the Treasury their preferred stock.

Well, that's the way we did business last year. Now Treasury is about to stop buying preferred stock. They're going to start buying toxic assets.

The bill we'll consider today does not deal with those firms who sell $5 billion, $10 billion, $50 billion worth of toxic assets to the U.S. government. So we have to deal with the bailed-out firms that get over $5 billion, whether they get it for toxic assets or whether they get it for preferred stock.

We have to deal with salaries, we have to deal with commissions, we have to deal with Employee of the Week bonus payments or prize payments. We have to deal with all aspects

of compensation. Until then, our constituents will be justifiably skeptical.

Mr. Speaker, I will try not to consume the entire 60 minutes, but I do have much to say about the progress of the so-called TARP, or bailout, program and the treatment of executives as well as general creditors and counter-parties under that bill.

I think that the way this bill has been administered has been a travesty for quite some time, and it is perhaps peculiar that only this last outrage from AIG has generated the kind of public revulsion that is well justified by actions taken prior to the recent AIG giant bonus payments.

But let us look in particular at AIG. They have healthy insurance companies, a healthy savings bank, all owned by a parent company. And that parent company decided to establish a Financial Products division, a casino, in which the rich and powerful from around the world could come to bet. In fact, that is what they did. And they bet that American mortgages would decline in value. These gamblers were right, but they were too smart by half because together, they broke the bank. And now they come to American taxpayers, and they say, ``You should make sure that we walk away from the table with our winnings intact.''

Now, how does this compare to the way that capitalism is supposed to work? When an insolvent institution has general creditors and that insolvency requires governmental intervention, usually in the form of bankruptcy reorganization or receivership, not just the shareholders, not just the executives, but also the general creditors and the counter-parties take a substantial hit. This is what is, in effect, happening with General Motors today. Now, General Motors is not in a formal bankruptcy, but they are carrying on pre-bankruptcy or in-lieu- of-bankruptcy negotiations. Their workers are seeing their contract changed and modified. The bondholders are seeing that they will get paid only one-third of what the bond contract says they are supposed to be paid in cash. So what kind of country is it when what was once our greatest industrial company, the investors and the bondholders of that company, the workers at that company are told that they have to take a substantial hit, but a giant casino, we are told, those who went and bet at that casino need to get every dollar their winnings entitle them to at the expense of the Federal Government and, oh, by the way, the croupier is supposed to get a $6 million bonus as well?

The difference is that the AIG-Wall Street axis represents the most powerful in the world, and they are not going to sit idly by as people say that just because AIG is insolvent, they should take less than everything they want.

What should have happened to AIG long ago is AIG should have gone into receivership. Now, this would have liberated their insurance subsidiaries and savings bank, which are healthy, to be spun off and to play the role that they need to play in our economy. Now, it is said that these subsidiaries would have been hurt, that the consumers of the insurance company would feel bad and reluctant and uneasy if AIG went into receivership because, after all, that would mean AIG would get a lot of bad press and some of that bad feeling might attach itself to these subsidiaries. Well, my God, is there anything that could have generated more bad press for AIG and every entity associated with it than the events of the last few days?

Had AIG gone into receivership, it would have been a 1-day story. Oh, in the financial press they would have covered it for weeks, but it would have been a 1-day story on the front page of every newspaper in the country. Instead, those affiliated and associated with AIG are being associated with what has got to be referred to as the worst business press any company has received.

The second thing that would have happened with receivership is that the general creditors, the counter-parties, the people who won by placing bets at the AIG casino would have to take less

than what the contract provides. This would have been a reasonable outcome because one of the bets you make when you go to the casino is whether the casino is going to be able to pay. And if the house can't afford to pay, the House of Representatives shouldn't be the ones called upon to do so.

Finally, receivership would have voided or forced major modifications of all those bonus contracts that we are told are so sacrosanct that in a society with a rule of law we have got to pay the $6 million bonuses to the people who invented the AIG casino.

Now, we are told, oh, my God, we need these talented people to stay at AIG. We had testimony from the regulators of AIG's healthy subsidiaries, and they indicated to us in committee today that they have on their staffs at salaries between $100,000 and $150,000 people with expertise, substantial, major expertise, in credit default swaps. So if you want somebody with the expertise to deal with the assets that AIG needs to unwind, you may need to pay a salary of $100,000 or $150,000. But if you need not just that expertise but somebody who has the experience of creating a casino that destroyed the AIG Company and has imperiled the economy of the world, if you want somebody with the talent for that level of destruction, then you need to provide them with multi-million dollar bonuses. Clearly, AIG in receivership could have staff being paid reasonable amounts with the expertise necessary to carry on the necessary transactions.

Now, AIG is not the only one of these firms that should be in receivership because how can we make the major bank balance sheet healthy? What we're told is we have to remove the toxic assets. Well, I'm an old CPA. I know what a balance sheet looks like. And you never made a company any stronger by removing any kind of asset from its balance sheet. Now, if you cannot remove an asset from the balance sheet but, rather, trade a bad asset for a lot of taxpayer cash, that can, indeed, enrich the company, and that enrichment is reflected on the balance sheet.

But the way to strengthen these financial institutions isn't by taking assets off their balance sheet; it's by taking liabilities off their balance sheet. And how do you do that? Well, when you have an insolvent financial institution, you go into receivership. The creditors who are uninsured, the big boys, have to take a cut in the amount that's owed to them. That reduces the liabilities on the balance sheet. It increases the amount of net capital on the balance sheet, and that institution is able to emerge healthy and ready to do business and play the role in the economy it should.

Instead, we are told, Treasury is looking to buy the ``toxic assets'' in a ``public-private partnership.'' When you hear that the Treasury is going to trade cash for trash, that they are going to give large amounts of money in return for the worst assets these banks have, then hold on to your wallets.

But now we are told it will be a partnership between hedge funds and the Treasury, in which the Treasury will put up almost all of the money and the Treasury will take almost all of the risk and the private hedge funds will get almost all of the upside. This is, needless to say, something that's going to be hard to sell to a skeptical American public.

We need to make sure that if there's any public-private partnership, that the terms on which the Treasury invests are identical to those terms of the private investors. They put a dollar on the table, we put a dollar on the table. They make a dime, we make a dime. We lose a dime, they lose a dime.

Instead, what I fear will be created is a system in which we put $9 on the table, they put $1. And if money is to be made, it goes chiefly to the folks that put in only $1 of capital. Beware of any system that is overly complex, because that is a system in which the taxpayers may get shortchanged.

I think we speak from experience, because taxpayers have already invested in the preferred stock of all these big banks, and the official congressional oversight panel says we got shortchanged to the tune of roughly $78 billion, 31 percent of the amount we invested. It got a few headlines for a while, and people have forgotten.

Now we're told that these same companies that shortchanged us, that took in $252 billion of our money but gave us securities worth $78 billion less than the cash we gave them, that they are eligible for further bailouts, that we are ready to do business with them as if they have sinned not at all. We should establish a policy that we are not doing business with these banks that shortchanged us until they give us additional preferred stock to fully compensate for the cash that we have put into the institutions.

I fear that this will not be the policy of the Treasury. We already know, because I asked them at the last hearing, that the major banks are unwilling, on their own, to issue additional preferred stock to the U.S. Treasury in order to make up for the fact that they have shortchanged us.

So we need to compel those additional shares of preferred stock to be issued. We need to be wary of buying toxic assets. We need to be wary of buying any assets on terms under which we put up most of the money and take most of the risk and private interests get most of the upside.

But let me return to the issues of executive compensation which are, after all, what has touched a nerve with the American people. Before I quite go to executive compensation, let's talk a little bit about why that nerve was hit and why the larger rip-offs of the taxpayer have generated less attention. The reason is simply that people understand what it is for somebody who screwed up a company and drove it into the ground and imperiled the American economy to get a $6 million bonus. They understand a $6 million bonus.

In contrast, the fact that the counterparties and general creditors of insolvent institutions are being paid in full when they should take a substantial haircut, that is something outside the experience of the American people. So, recently, we put up $30 billion to AIG. Immediately $20 billion went to the richest and most powerful in the world.

Over the last few months, tens of billions of dollars have gone to foreign banks, as if bailing out American banks wasn't taxing us sufficiently already, those are the multibillion, the $10 billion, the $100 billion transactions. They are complex, and Wall Street is able to use that complexity to say, ``Oh, American taxpayers, you just don't understand, but trust us, trust us. The whole world economy will implode if you don't make sure that the credit default swap counterparties are paid in full.''

And since so few Americans have much experience with credit default swaps, they have been able to sell that, and that's the big swindle. The small swindle is the $6 million, the $3 million bonus, the $165 million in total bonuses going to this unit of AIG at this time. That is something the American people understand.

So what are we going to do about it? First of all, let's reflect. If AIG had gone into receivership even a few days ago, those bonuses would not have been disbursed and the contracts under which they had been paid would have been modified or discarded. We still need receivership for AIG, but receivership last week would have been better.

But now we have an opportunity to use the Tax Code to make sure that those who receive excess compensation and who work for these big bailed-out banks have to give that money back, either to the employer, or have to give it back through the Tax Code to the American taxpayer.

Now I think that tax bill may reach this floor tomorrow. Let us discuss what should be in it, and I am concerned that a few things that should be in it will not be in it. First, and I think that the bill will be good in this respect, it shouldn't just be an AIG bill. What about the giant bonuses at Merrill Lynch?

What about all those who are getting multimillion-dollar bonuses and working at firms that are insolvent, firms that need to be propped up by this extraordinary and perverse departure from capitalism called the TARP program? We ought to treat all executives at the big bailed-out firms the same.

Now I see a reason to draw a line with those bailed-out firms that received only a few billion dollars in TARP money. They might be viewed separately. But those who have received many billions of taxpayer

money, those companies, we ought to look to the executives and say we don't think you should be receiving more than a reasonable amount of compensation.

Now President Obama has drawn that line at half a million dollars of compensation per year. Plus, in his program, and he has several programs, this is the program that's most severe, plus an unlimited amount of restricted stock. That would be a reasonable line. Other people might draw the line differently.

But we need to apply it, not just to bonuses, but to other forms of compensation as well. We got all upset about bonuses, they started calling them retention payments. Now we are going to pass a tax law dealing with bonuses and retention payments.

You know what they are going to do? They are going to increase the salaries from $1 million a month up to $2 million a month. So the first thing we need, in any tax law designed to tax away the ill-gotten excessive compensation of executives with bailed-out firms is we need to deal with all forms of compensation, not just bonuses.

Otherwise we will go back to our constituents for the District Work Period and they will say, fine, Congressman, fine, Congresswoman, you dealt with the bonuses, what about the $1 million-a-month salaries? What about the fact that some of them went up to $2 million a month? Deal with the entire executive compensation. Deal with all of the major bailed-out firms.

Next, it is important that any tax bill provide explicitly what happens if, as we hope, the executive decides to return to the company the excessive portion of the compensation they have received.

So I look forward to working both on this floor and perhaps with a conference committee to have a bill that is comprehensive as to which companies it deals with, that is comprehensive in that it deals with all forms of compensation.

I see we have been joined by the esteemed gentlelady from Texas, and at this point I shall yield to her for whatever comments she would like to make to the House.

I thank the gentlelady from Texas. At this point I would want to resume my comments about the tax bill or the latest draft of it that I expect will come before this floor tomorrow.

The bill is retroactive in the sense that it does affect the taxation of monies received in 2008. That is not the best way to pass tax law, but it is not uncommon to act right up until April 15, 2009 or, even later, to affect the tax law applicable to 2008 tax returns.

There have been many occasions when this House has, after the end of a calendar year, modified the tax law for that year. Usually, that takes the form of a tax reduction. But it has sometimes taken the form of a tax increase.

Second, I should point out that the draft that is in circulation now uses the term ``capital infusions'' so as to apply the bill to executives with companies that have received capital infusions of over $5 billion. The bill, however, does not define the term capital infusions and so it leaves open how it would apply in two different situations.

In one situation, it clearly would apply, and that is if the Federal Government spends $5 billion or more to buy preferred stock from a company, we have made a capital infusion in that company of $5 billion or more.

But it now appears that Treasury is going to buy toxic assets from companies. The authors of the tax legislation should indicate if somebody sells us a big package of bad mortgages for $5 billion or $10 billion, is that company covered by this new tax law--or are the executives covered by this new tax law.

Second, the draft that is coming before us--and this isn't really second, but this is last on my list, rather--deals, perhaps unfairly, with small bonuses.

The draft, for example--say you have an individual, and I will make it simple by assuming this individual is filing a separate tax return, separate from his or her spouse. And say the individual makes $125,000 a year salary and a $10,000 bonus. Under this draft, they face a penalty tax on the $10,000 bonus.

Well, somebody earning $125,000 dollars isn't terribly rich certainly, by Wall Street standards, and a $10,000 dollar bonus may not be excessive.

The bill's laser-like focus on bonuses could subject a $10,000 bonus to a $9,000 tax, notwithstanding the fact that if somebody is getting $1 million a month in salary, and no bonus--if you're getting $1 million a month in salary, I'm not sure you need a bonus--that person will face no additional tax under this tax bill.

So I would hope that the bill would be reconfigured to deal with the total compensation package, including salaries and, in any case, even if it's just going to be targeted at bonuses, should focus not on small bonuses received by people who are earning modest middle-class or even upper middle-class salaries.

The next point I would like to make--I think it's kind of obvious from the tone I'm taking that I voted against the TARP bill on this floor, twice, and hope that we see very substantial changes in the way we are dealing with financial institutions before we are called upon to vote on any financial rescue bill in the future.

One change we need to see, a change I think we can believe in, would be a change of personnel in Treasury as to the Assistant Secretary of the Treasury responsible for the TARP program. I refer to it not by its technical name but the Assistant Secretary for Big Bank Bailouts.

Neel Kashkari is a holdover from the last administration. He is, more than any other person, responsible for the fact that we got shortchanged to the tune of $78 billion worth of securities on our first $252 billion of security purchases. He is still there.

If there's one thing this country wanted change and expected would be changed on January 20 of this year, it would be the person in charge of the TARP program. And I look forward to the day when we get a new assistant secretary into that position. Even a temporary acting assistant secretary drawn from the banks of the bureaucracy would be an improvement over someone who has managed to lose 31 percent, and more, of everything we have invested.

Now I'd like to return to the process by which AIG revealed these bonuses. It is true that everyone paying attention is aware that AIG had a lot of excessively compensated individuals. In fact, when Neel Kashkari, the Assistant Secretary of the Treasury, came before our committee, I questioned him about what I knew were $3 million bonuses being paid to AIG executives. I was able to point out to him that the TARP statute mandated that the Secretary of the Treasury provide standards of appropriate executive compensation, and that only because Treasury had deliberately intentionally ignored that general mandate were the--at that point, I only knew of $3 million bonuses being paid at AIG--were they paid.

Assistant Secretary of the Treasury Kashkari, then speaking for the old administration, but perhaps holding the same views under the new administration, would not opine on whether a $3 million AIG bonus was or was not appropriate executive compensation.

The fact is, Treasury continues to have the power and the duty to issue regulations defining executive compensation--appropriate levels of executive compensation at bailed out firms. They should do that, and do it promptly.

So, in any case, people were aware that there were executives at AIG getting enormous bonuses and huge salaries. But this last weekend, it was revealed to us some particularly painful details. First, that $165 million was about to be disbursed. Second, that the chief beneficiaries were going to be the people that created the most malignant casino in the history of Wall Street, the AIG Financial Products Division.

So all this money, or virtually all of it, was going to the people at the division that had destroyed the AIG company and much of Wall Street besides.

Finally, we learned that some of those bonuses would be in excess of millions of dollars--in one case, over $6 million. Those particulars were revealed just hours before the checks were distributed. And the question is: Did the securities law of the United States require that AIG reveal that much, much earlier.

If the securities laws are not that clear, they should be, because the theme of the securities laws are that a company must reveal on a timely basis material information to its shareholders. Material information is that which would influence the shareholders in a decision to invest.

Well, the American taxpayer invested $30 billion additional into the AIG morass just 2 weeks ago. I submit we definitely would have been influenced by knowing that these particular bonuses were being paid to the executives of the Financial Products Division of AIG.

But, instead, these bonuses were hidden from us. The particulars were hidden from us right up until hours before disbursement. Well, why was that done? Because we could have, as a country, put AIG into receivership before they got the last $30 billion. We could have saved ourselves $30 billion and, in the process, we would also have invalidated or forced a judicial modification of all those obnoxious bonus contracts.

But they didn't tell us about this. They didn't give us the particulars that are so important to the American taxpayer. They may have told one or two people over at the Federal Reserve Board, but securities law does not say that you reveal material facts to one or two people at the Federal Reserve Board. Securities law says material facts need to be revealed to shareholders promptly. And there is nothing that the 300 million shareholders of AIG--the American people-- find more significant to them than this obnoxious bonus program.

I suggest that we were not told until the bonuses were distributed, not only to protect the bonuses, but to protect the concept that AIG's general creditors and counterparts should be paid in full with taxpayer dollars, as necessary.

America would be a lot happier today. The subsidiaries of AIG, the insurance companies and the savings bank, would be much stronger today. The likelihood of the administration being able to get this Congress to pass additional legislation if it finds that necessary would be much higher today.

If AIG had revealed these material facts in all of their very significant particulars months ago, or even weeks ago, but somebody at AIG decided not to tell us. Somebody at the Fed may have known these particulars and decided that the American people should not be trusted with such inflammatory information. And that is why we are where we are today.

I look forward to strengthening America's insolvent financial institutions, not by putting in hundreds of billions of dollars more of taxpayer money, not by creating partnerships in which we put up hundreds of billions of dollars but, if there's any upside, it

goes to various hedge funds on Wall Street.

I look forward to strengthening these institutions, not by removing assets, even assets that have declined in value, but assets nevertheless, from their balance sheet. I look forward to strengthening these institutions by going into receivership, removing liabilities from their balance sheet, thereby increasing their net worth, their capital, and returning them to the private sector as very, very well- capitalized institutions.

What is standing in our way is the fact that that reduction in liability is a reduction in the amount payable to the most powerful in the world--the largest financial institutions in the world.

One final comment. I thank the House for indulging this lengthy speech. First we were told that AIG was too big to fail. Then the folks on Wall Street came up with a new story. They said AIG was too interconnected with other institutions to fail.

Well, AIG is not too big to fail. It's not too interconnected to fail. It's too well-connected to fail. But receivership is not failure for AIG. Receivership is the road to success for AIG.

It simply will cost these very well-connected general creditors, the ones who went and bet at the AIG casino, the ones who broke the AIG casino bank. It will simply cost them money. And this Congress and this government should have the courage to do just that for the benefit of the American people.

I yield back the balance of my time.

Mr. Speaker, the AIG Financial Products unit created a casino. At that casino, people were invited to bet on credit default swaps. Smart people went to that casino, the largest financial institutions, the richest and the most powerful in the world. They were smart. They bet against the mortgage market of the United States. They won. But they broke the bank.

Now when ordinary gamblers break the bank, they have to settle for less than their full winnings. But these, as I said, are the most rich and powerful and best--connected institutions in the world, and they want everything the contract calls for. And that is why American taxpayers have provided $170 billion in payments and risk assumption so that these gamblers would be paid.

That is not how capitalism is supposed to work. When you're owed money by an insolvent financial institution, that institution is supposed to be in receivership. Those who have insured accounts or insured life insurance policies get paid; everybody else takes a substantial haircut. But, instead, Wall Street is telling us that there is this sanctity of contract; so they must get every penny that Wall Street is supposed to get under the contract.

Wait a minute. Sanctity of contract? Every bankruptcy, every receivership involves setting aside virtually every contract of the insolvent financial institution. And when Richard Nixon was President, he, through wage and price controls, shredded every wage contract in this country.

Receivership is the way to clean up the balance sheets of our financial institutions. But we're not focused on it because it costs the shareholders, it costs the creditors, it costs management, and they would rather give us a ``solution'' that costs the American taxpayer.

Receivership means that you strip some liabilities off the balance sheet. That is the way to strengthen the balance sheet of our financial institutions. Instead, we're told that the way to improve these balance sheets is to take assets off the balance sheet, albeit the so-called toxic assets. There's nothing the matter with those assets except they're worth less than they used to be. You do not strengthen financial institutions by taking their assets. You strengthen them by putting them in receivership and removing their liabilities.

Now we're focused on the bonuses being paid to the croupiers of this AIG casino. Receivership would have been the clearest way to prevent those payments from being made, but we weren't told about those outrageous bonuses until hours before they were distributed.

Now all that money is in the hands of the executives. No doubt they have got them in Cayman Island accounts as we speak.

Those bonuses should have been disclosed to us, but there is something this Congress can do, and that is through the Tax Code. Impose on the executives of all TARP bailed-out firms a special surtax on that portion of their compensation which is excess.

I think that ought to be the portion in excess of $500,000, excluding restricted stock. That is the exact standard put forward by President Obama for his toughest standard on executive compensation.

That tax could be at the 60, 70, 80 percent level, and those executives who did not want to pay the tax could, instead, return the excess portion of their compensation to their employer. It is important that this tax law apply not only to those who received excess payments in 2009, but also those who received the excess payments in 2008.

We have a precedent for having excess profits taxes. We can have a special tax on excess compensation.

We also, though, need to put AIG and others into receivership because this is the way we can deal, not with the bonuses, which are in the hundreds of millions of dollars, but deal with the tens and hundreds of billions of dollars of taxpayer money that are being disbursed to the wealthiest financial institutions of the world, including tens of billions of dollars going overseas.

In order to get this economy moving again, we need banks and other financial institutions with strong balance sheets. The way to get strong balance sheets is to write down liabilities, not to ``get rid of'' certain assets by calling them toxic assets. It is unlikely that we will pursue this plan because it will lead to substantial losses for the most powerful, richest and best-connected institutions and individuals in this country, but it is the way for us to go forward.

I look forward to working with my colleagues to getting to a plan that serves Main Street, not Wall Street.

Mr. Chair, the Price amendment to H.R. 1106 fails to deal appropriately with post-bankruptcy improvements made by the homeowner.

I am all for the private sector paying executives whatever the private sector wants to, but it is very different when the so-called private sector firms, the firms that demand hundreds of billions of dollars in Federal funds, decide that they want to pay executives lavish salaries and enormous bonuses. That is why I have come to this floor often to talk about the executive compensation of those firms that have benefited from the $700 billion bailout also known as the TARP.

Why is this executive compensation issue important for those companies that have received TARP funds?

First, because of fairness. Executives who have driven their companies into the ditch so badly that they need a Federal bailout shouldn't be receiving enormous salaries.

Second, our constituents demand it. And if you don't think they demand it, see what happens when the administration comes, having gotten the second $350 billion and asks for another one-half trillion dollars, a third installment on the TARP. We will hear from our constituents.

Third, the law we passed demands that there be reasonable standards of executive compensation at every company that receives TARP funds. I thought the Bush administration would fail to follow that law, one of the many reasons I voted against it, and Section 111 of the TARP bill continues not to be applied.

And finally, and most importantly, our economy demands that we be tough with those who are coming to Washington for bailouts, because otherwise every executive and every industry is going to be coming here asking for a bailout.

So I was surprised this morning when my staff called me and said, ``Congressman, announce victory. President Obama and the Secretary of the Treasury have announced that we are going to have a $500,000 limit on executive compensation of those who have received TARP funds.'' That was even stricter than the limit that I was proposing.

Unfortunately, the Treasury Department has now issued a detailed statement of how they are going to carry out this $500,000 limit, and they have made a mockery of the solemn pledge made today by the President of the United States to the American people. The headline is, ``$500,000 Limit.'' However, the text of the Treasury announcement has three giant loopholes that make a nullity out of the statement of the President.

First, the limit has no application to those companies who have already received money unless they come back for even more. So Citigroup and AIG, who have already received well over $40 billion apiece in government money, have no limits, and they can pay $1 million a month, $2 million a month, to whatever executive they choose.

But, second, what about those companies that are going to get more money in the future? How are they affected by the Treasury Department's interpretation of the President's statement? Well, they can pay any amount they want as long as they have a shareholder vote. And here is the beautiful part. They can pay it even if the shareholders vote against paying it. It is a nonbinding resolution. So you can get a huge amount of money from the government before today, then get another helping of TARP money after today and pay any executive anything you want as long as you have a nonbinding resolution of your shareholders which you are free to ignore.

Now, there are a few companies that are going to face a real limit, not the ones who got the first helping like the $25 billion that went to the major banking institutions; not those who got their second helping, an extraordinary amount of money that they may have gotten prior to today; not those who got the third helping of TARP funds, the ``ordinary'' amount that might be distributed in the future. But if you come back for a fourth helping, then and only then do you face a real $500,000 limit on executive compensation.

Finally, the proposal is supposed to contain limits on luxury perks. But what does the proposal really contain in the fine print? It says that the board of directors of these companies has got to adopt a policy dealing with such items as private jets and lavish parties. Well, these are the boards of directors who have already approved every private jet and the concept behind every lavish party that these companies have already had. So what good is it to have these same board of directors adopt new policies which will simply mirror their own old policies on luxury perks?

I look forward to working with the administration, with the Treasury Department, so that the words of the President of the United States to the American people today are not rendered moot, but rather are actually carried out. We need a real $500,000 limit on all those firms that are holding our TARP funds, our taxpayer money. And I hope those companies choose to return the money to the Treasury, then they can pay their executives whatever they want.

I thank the gentlewoman for yielding time.

This bill contains aid to States, which is important because the worst thing for us to do in a recession is to fire cops and teachers. This bill includes $114 billion of business tax incentives, which are well crafted because we do not cut tax rates. What we simply do in this bill is allow businesses to take deductions in 2009 that they would otherwise be taking early next decade. And, in fact, of that $114 billion listed as going to business, well more than 80 percent comes back to the Treasury early next decade.

But what can we tell markets today about what is likely to happen to the national debt over the next decade? We are saddled with an $11 trillion national debt. The Fed has quietly issued $7 trillion of guarantees and loans. We've sent nearly a trillion to Wall Street, all on top of a trillion dollar deficit.

Before we do more, we should put into statute the tax increases and expenditure cuts, painful as they will be, that will go into effect in the year after unemployment drops below 4 percent. Sure, we would have to modify such provisions before they go into effect. But we need to adopt both halves of Keynesian economics, both stimulus now and austerity later, and we need to put both halves in statute. Otherwise, those of us who will be advocating fiscal restraint in the future may well lose, and our only recourse will be to prevent the full measure of stimulus that this economy needs now because we are fearful that we will not be able to reverse it later. And, in fact, that is what has happened.

This bill provides inadequate stimulus today and inadequate recapture of that stimulus, actually virtually no recapture of that stimulus, early next decade.

If we're going to use Keynesian economics, let's put into statute both halves. Otherwise, we can provide only empty promises to our children and empty promises to Wall Street and to the world economic community that we will do something about this deficit next decade.

Mr. Speaker, I yield myself 3\1/2\ minutes.

The TARP program is highly flawed. It is up to us to pass good statutory provisions, not to give blank checks to the last administration, or even this administration. We ought to improve the program. The bill we passed yesterday is just a down payment or, since the Senate may not act on it, just an attempt at a down payment on the statutory changes we ought to adopt. But the question is, how do we vote on this resolution today?

If the Senate had voted to block funding, then today's vote would be entirely different. Effectively blocking funding might be the first step in forcing statutory changes; but that is not where we are today. Instead, we are here voting on a bill that both sides agree has no statutory significance. Under the existing statute, this administration will get $350 billion subject only to the very limited restrictions imposed by the bill that we passed, and I voted against, last fall. This vote is nothing more than a nonbinding resolution. It is a joint press release. It does not trigger any statutory provision; it does not write any statutory provision.

So how should we vote on this joint press release? Is it an accurate press release? Will the press understand it, or is it written in such a way that the press will misunderstand? In order to determine that, we have to understand the press.

I would hope that we would have a press in this country that, if we had voted for this resolution, would say: ``The House demands statutory improvements in the TARP program. It

demands the passage of the Frank bill and far more.'' Unfortunately, we know that will not be the headline.

It makes no sense to provide this press release to a press corps that instead will interpret it as saying: ``House repudiates President Obama on the second day of his term.'' But we know the press. They will put personality over substance, politics over policy. They will write this story, ignoring the problems with the TARP bill. They don't want to write about statutory provisions; they will write about politics not policy. So signing on to a joint press release knowing that the press will misinterpret it is a bad idea.

What is a good idea is using every vehicle we have to demand that we improve the TARP program, and that starts with passing the Frank bill and putting it on appropriations bills, putting it on the stimulus bill, making it clear to the Senate that nothing moves until that bill moves. But that is just the beginning. We need statutory provisions that say, if you get TARP money, then there will be no dividends, no stock repurchases. You can't take our money, and then give your money to your own shareholders. That we require the administration to get the maximum number of warrants, so that we participate in the upside of those companies that survive. That the statute does not authorize overpaying for toxic assets or buying bad bonds held by foreign investors. And, that we have real limits on executive compensation and perks, not just for those bailed out companies that are in Detroit, but those that are in New York as well.

We have got to communicate in every way we can to our leadership and to this country that we need massive improvements in the statutory provisions of TARP. Voting ``no'' on this resolution is the first step in making that clear. Voting ``yes'' would just be confusing.

Madam Speaker, yesterday, I was unable to make a number of votes because I was at the hospital with my wife for the delivery of our first child. I am pleased to announce that we had a healthy, beautiful baby girl named Molly Hannah.

Had I been present I would have voted: ``yea'' on rollcall No. 14; ``nay'' on rollcall No. 15; ``yea'' on rollcall No. 16 in support of H.R. 2, the bill to extend and improve the Children's Health Insurance Program, of which I was proud to be an original cosponsor; ``yea'' on rollcall No. 17, which allowed the House to proceed with a bill improving the TARP program; and ``yea'' on rollcall No. 18.

I thank the gentleman for yielding.

The bill is good as far as it goes, but before Congress thinks that we're done with the TARP program, we ought to be considering legislation to make it stronger and to provide additional limits.

First, and most important, we need to prohibit those companies that receive funds under this program from then paying dividends to their existing common shareholders or using their money to go buy the shares held by their existing shareholders. Why are we putting capital in if the company is then taking the capital out, and giving it to its existing shareholders? That needs to be prohibited by statute. At a minimum, I hope we get an unequivocal letter from the incoming administration that they will prevent such

transfers by regulation, and through other means.

Second, we need to make sure that if assets are purchased from the banks that were buying bad bonds, that such bonds were owned by American entities, including those with foreign parents, and that these bonds were owned by American entities on September 20, 2008, which is when the whole dam broke. What we don't want to do is see these monies go to buy bad bonds that were bad investments made in Shanghai and Riyadh and London.

Third, this bill under consideration, and the TARP bill, allows for Million-Dollar-a-Month salaries. We cannot go to the American people and say we have limited executive compensation except for the most common element of executive compensation, salaries. There ought to be a limit--and only on those companies, of course, that are holding taxpayer money. I say to those banks that want to pay more than a million a year, the banks that want to pay more than a million a month to some of their executives and say, fine, give us back the money first.

And finally, as to perks, one thing that the American people have focused on is the use of private executive jets. This bill says you cannot use those--you can't own them or lease them, at least--if your company is based in Detroit. But if you're a Wall Street bank, buy, lease, fly whatever you want. That is a strange anti-Detroit dichotomy. Why should we prohibit these luxury jets? Because we want them to give us the money back. We don't want every executive on Wall Street to come and take the TARP money and hold on to it as long as possible.

Second, we want to encourage jobs in the commercial aircraft industry, both the manufacture and operation of those Boeing jets and United and American Airlines. And finally, because when the banks spend the money on ridiculous perks, whether it be extreme limos or extreme jets, that's money they can't lend to businesses in our districts.

I ask unanimous consent that the Chair consider recognizing the gentleman from Texas first and then recognize me.

Thank you.