[Congressional Record (Bound Edition), Volume 155 (2009), Part 15]
[House]
[Pages 20398-20422]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              {time}  0945
 CORPORATE AND FINANCIAL INSTITUTION COMPENSATION FAIRNESS ACT OF 2009

  Mr. FRANK of Massachusetts. 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.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore. Pursuant to House Resolution 697, the 
amendment in the nature of a substitute recommended by the Committee on 
Financial Services, now printed in the bill is adopted and the bill, as 
amended, is considered read.
  The text of the bill, as amended, is as follows:

                               H.R. 3269

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Corporate and Financial 
     Institution Compensation Fairness Act of 2009''.

     SEC. 2. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION 
                   DISCLOSURES.

       (a) Amendment.--Section 14 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78n) is amended by adding at the end the 
     following new subsection:
       ``(i) Annual Shareholder Approval of Executive 
     Compensation.--
       ``(1) Annual vote.--Any proxy or consent or authorization 
     (the solicitation of which is subject to the rules of the 
     Commission pursuant to subsection (a)) for an annual meeting 
     of the shareholders to elect directors (or a special meeting 
     in lieu of such meeting) where proxies are solicited in 
     respect of any security registered under section 12 occurring 
     on or after the date that is 6 months after the date on which 
     final rules are issued under paragraph (4), shall provide for 
     a separate shareholder vote to approve the compensation of 
     executives as disclosed pursuant to the Commission's 
     compensation disclosure rules for named executive officers 
     (which disclosure shall include the compensation committee 
     report, the compensation discussion and analysis, the 
     compensation tables, and any related materials, to the extent 
     required by such rules). The shareholder vote shall not be 
     binding on the issuer or the board of directors and shall not 
     be construed as overruling a decision by such board, nor to 
     create or imply any additional fiduciary duty by such board, 
     nor shall such vote be construed to restrict or limit the 
     ability of shareholders to make proposals for inclusion in 
     such proxy materials related to executive compensation.
       ``(2) Shareholder approval of golden parachute 
     compensation.--
       ``(A) Disclosure.--In any proxy or consent solicitation 
     material (the solicitation of which is subject to the rules 
     of the Commission pursuant to subsection (a)) for a meeting 
     of the shareholders occurring on or after the date that is 6 
     months after the date on which final rules are issued under 
     paragraph (4), at which shareholders are asked to approve an 
     acquisition, merger, consolidation, or proposed sale or other 
     disposition of all or substantially all the assets of an 
     issuer, the person making such solicitation shall disclose in 
     the proxy or consent solicitation material, in a clear and 
     simple form in accordance with regulations to be promulgated 
     by the Commission, any agreements or understandings that such 
     person has with any named executive officers of such issuer 
     (or of the acquiring issuer, if such issuer is not the 
     acquiring issuer) concerning any type of compensation 
     (whether present, deferred, or contingent) that is based on 
     or otherwise relates to the acquisition, merger, 
     consolidation, sale, or other disposition of all or 
     substantially all of the assets of the issuer and the 
     aggregate total of all such compensation that may (and the 
     conditions upon which it may) be paid or become payable to or 
     on behalf of such executive officer.
       ``(B) Shareholder approval.--Any proxy or consent or 
     authorization relating to the proxy or consent solicitation 
     material containing the disclosure required by subparagraph 
     (A) shall provide for a separate shareholder vote to approve 
     such agreements or understandings and compensation as 
     disclosed, unless such agreements or understandings have been 
     subject to a shareholder vote under paragraph (1). A vote by 
     the shareholders shall not be binding on the issuer or the 
     board of directors of the issuer or the person making the 
     solicitation and shall not be construed as overruling a 
     decision by any such person or issuer, nor to create or imply 
     any additional fiduciary duty by any such person or issuer.
       ``(3) Disclosure of votes.--Every institutional investment 
     manager subject to section 13(f) shall report at least 
     annually how it voted on any shareholder vote pursuant to 
     paragraphs (1) or (2) of this section, unless such vote is 
     otherwise required to be reported publicly by rule or 
     regulation of the Commission.
       ``(4) Rulemaking.--Not later than 6 months after the date 
     of the enactment of the Corporate and Financial Institution 
     Compensation Fairness Act of 2009, the Commission shall issue 
     final rules to implement this subsection.
       ``(5) Exemption authority.--The Commission may exempt 
     certain categories of issuers from the requirements of this 
     subsection, where appropriate in view of the purpose of this 
     subsection. In determining appropriate exemptions, the 
     Commission shall take into account, among other 
     considerations, the potential impact on smaller reporting 
     issuers.''.
       (b) Prohibition on Clawbacks.--
       (1) Prohibition.--No compensation of any executive of an 
     issuer, having been approved by a majority of shareholders 
     pursuant to section 14(i) of the Securities Exchange Act of 
     1934 (as added by subsection (a)), may be subject to any 
     clawback except--
       (A) in accordance with any contract of such executive 
     providing for such a clawback; or

[[Page 20399]]

       (B) in the case of fraud on the part of such executive, to 
     the extent provided by Federal or State law.
       (2) Regulations.--The Securities and Exchange Commission 
     shall promulgate rules necessary to implement and enforce 
     paragraph (1).

     SEC. 3. COMPENSATION COMMITTEE INDEPENDENCE.

       (a) Standards Relating to Compensation Committees.--The 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
     amended by inserting after section 10A the following new 
     section:

     ``SEC. 10B. STANDARDS RELATING TO COMPENSATION COMMITTEES.

       ``(a) Commission Rules.--
       ``(1) In general.--Effective not later than 9 months after 
     the date of enactment of the Corporate and Financial 
     Institution Compensation Fairness Act of 2009, the Commission 
     shall, by rule, direct the national securities exchanges and 
     national securities associations to prohibit the listing of 
     any class of equity security of an issuer that is not in 
     compliance with the requirements of any portion of 
     subsections (b) through (f).
       ``(2) Opportunity to cure defects.--The rules of the 
     Commission under paragraph (1) shall provide for appropriate 
     procedures for an issuer to have an opportunity to cure any 
     defects that would be the basis for a prohibition under 
     paragraph (1) before the imposition of such prohibition.
       ``(3) Exemption authority.--The Commission may exempt 
     certain categories of issuers from the requirements of 
     subsections (b) through (f), where appropriate in view of the 
     purpose of this section. In determining appropriate 
     exemptions, the Commission shall take into account, among 
     other considerations, the potential impact on smaller 
     reporting issuers.
       ``(b) Independence of Compensation Committees.--
       ``(1) In general.--Each member of the compensation 
     committee of the board of directors of the issuer shall be 
     independent.
       ``(2) Criteria.--In order to be considered to be 
     independent for purposes of this subsection, a member of a 
     compensation committee of an issuer may not, other than in 
     his or her capacity as a member of the compensation 
     committee, the board of directors, or any other board 
     committee accept any consulting, advisory, or other 
     compensatory fee from the issuer.
       ``(3) Exemption authority.--The Commission may exempt from 
     the requirements of paragraph (2) a particular relationship 
     with respect to compensation committee members, where 
     appropriate in view of the purpose of this section.
       ``(4) Definition.--As used in this section, the term 
     `compensation committee' means--
       ``(A) a committee (or equivalent body) established by and 
     amongst the board of directors of an issuer for the purpose 
     of determining and approving the compensation arrangements 
     for the executive officers of the issuer; and
       ``(B) if no such committee exists with respect to an 
     issuer, the independent members of the entire board of 
     directors.
       ``(c) Independence Standards for Compensation Consultants 
     and Other Committee Advisors.--Any compensation consultant or 
     other similar adviser to the compensation committee of any 
     issuer shall meet standards for independence established by 
     the Commission by regulation.
       ``(d) Compensation Committee Authority Relating to 
     Compensation Consultants.--
       ``(1) In general.--The compensation committee of each 
     issuer, in its capacity as a committee of the board of 
     directors, shall have the authority, in its sole discretion, 
     to retain and obtain the advice of a compensation consultant 
     meeting the standards for independence promulgated pursuant 
     to subsection (c), and the compensation committee shall be 
     directly responsible for the appointment, compensation, and 
     oversight of the work of such independent compensation 
     consultant. This provision shall not be construed to require 
     the compensation committee to implement or act consistently 
     with the advice or recommendations of the compensation 
     consultant, and shall not otherwise affect the compensation 
     committee's ability or obligation to exercise its own 
     judgment in fulfillment of its duties.
       ``(2) Disclosure.--In any proxy or consent solicitation 
     material for an annual meeting of the shareholders (or a 
     special meeting in lieu of the annual meeting) occurring on 
     or after the date that is 1 year after the date of enactment 
     of the Corporate and Financial Institution Compensation 
     Fairness Act of 2009, each issuer shall disclose in the proxy 
     or consent material, in accordance with regulations to be 
     promulgated by the Commission whether the compensation 
     committee of the issuer retained and obtained the advice of a 
     compensation consultant meeting the standards for 
     independence promulgated pursuant to subsection (c).
       ``(3) Regulations.--In promulgating regulations under this 
     subsection or any other provision of law with respect to 
     compensation consultants, the Commission shall ensure that 
     such regulations are competitively neutral among categories 
     of consultants and preserve the ability of compensation 
     committees to retain the services of members of any such 
     category.
       ``(e) Authority To Engage Independent Counsel and Other 
     Advisors.--The compensation committee of each issuer, in its 
     capacity as a committee of the board of directors, shall have 
     the authority, in its sole discretion, to retain and obtain 
     the advice of independent counsel and other advisers meeting 
     the standards for independence promulgated pursuant to 
     subsection (c), and the compensation committee shall be 
     directly responsible for the appointment, compensation, and 
     oversight of the work of such independent counsel and other 
     advisers. This provision shall not be construed to require 
     the compensation committee to implement or act consistently 
     with the advice or recommendations of such independent 
     counsel and other advisers, and shall not otherwise affect 
     the compensation committee's ability or obligation to 
     exercise its own judgment in fulfillment of its duties.
       ``(f) Funding.--Each issuer shall provide for appropriate 
     funding, as determined by the compensation committee, in its 
     capacity as a committee of the board of directors, for 
     payment of compensation--
       ``(1) to any compensation consultant to the compensation 
     committee that meets the standards for independence 
     promulgated pursuant to subsection (c), and
       ``(2) to any independent counsel or other adviser to the 
     compensation committee.''.
       (b) Study and Review Required.--
       (1) In general.--The Securities and Exchange Commission 
     shall conduct a study and review of the use of compensation 
     consultants meeting the standards for independence 
     promulgated pursuant to section 10B(c) of the Securities 
     Exchange Act of 1934 (as added by subsection (a)), and the 
     effects of such use.
       (2) Report to congress.--Not later than 2 years after the 
     rules required by the amendment made by this section take 
     effect, the Commission shall submit a report to the Congress 
     on the results of the study and review required by this 
     paragraph.

     SEC. 4. ENHANCED COMPENSATION STRUCTURE REPORTING TO REDUCE 
                   PERVERSE INCENTIVES.

       (a) Enhanced Disclosure and Reporting of Compensation 
     Arrangements.--
       (1) In general.--Not later than 9 months after the date of 
     enactment of this Act, the appropriate Federal regulators 
     jointly shall prescribe regulations to require each covered 
     financial institution to disclose to the appropriate Federal 
     regulator the structures of all incentive-based compensation 
     arrangements offered by such covered financial institutions 
     sufficient to determine whether the compensation structure--
       (A) is aligned with sound risk management;
       (B) is structured to account for the time horizon of risks; 
     and
       (C) meets such other criteria as the appropriate Federal 
     regulators jointly may determine to be appropriate to reduce 
     unreasonable incentives offered by such institutions for 
     employees to take undue risks that--
       (i) could threaten the safety and soundness of covered 
     financial institutions; or
       (ii) could have serious adverse effects on economic 
     conditions or financial stability.
       (2) Rules of construction.--Nothing in this subsection 
     shall be construed as requiring the reporting of the actual 
     compensation of particular individuals. Nothing in this 
     subsection shall be construed to require a covered financial 
     institution that does not have an incentive-based payment 
     arrangement to make the disclosures required under this 
     subsection.
       (b) Prohibition on Certain Compensation Arrangements.--Not 
     later than 9 months after the date of enactment of this Act, 
     and taking into account the factors described in 
     subparagraphs (A), (B), and (C) of subsection (a)(1), the 
     appropriate Federal regulators shall jointly prescribe 
     regulations that prohibit any incentive-based payment 
     arrangement, or any feature of any such arrangement, that the 
     regulators determine encourages inappropriate risks by 
     covered financial institutions that--
       (1) could threaten the safety and soundness of covered 
     financial institutions; or
       (2) could have serious adverse effects on economic 
     conditions or financial stability.
       (c) Enforcement.--The provisions of this section shall be 
     enforced under section 505 of the Gramm-Leach-Bliley Act and, 
     for purposes of such section, a violation of this section 
     shall be treated as a violation of subtitle A of title V of 
     such Act.
       (d) Definitions.--As used in this section--
       (1) the term ``appropriate Federal regulator'' means--
       (A) the Board of Governors of the Federal Reserve System;
       (B) the Office of the Comptroller of the Currency;
       (C) the Board of Directors of the Federal Deposit Insurance 
     Corporation;
       (D) the Director of the Office of Thrift Supervision;
       (E) the National Credit Union Administration Board;
       (F) the Securities and Exchange Commission; and
       (G) the Federal Housing Finance Agency; and
       (2) the term ``covered financial institution'' means--
       (A) a depository institution or depository institution 
     holding company, as such terms are defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813);
       (B) a broker-dealer registered under section 15 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78o);
       (C) a credit union, as described in section 19(b)(1)(A)(iv) 
     of the Federal Reserve Act;
       (D) an investment advisor, as such term is defined in 
     section 202(a)(11) of the Investment Advisers Act of 1940 (15 
     U.S.C. 80b-2(a)(11));
       (E) the Federal National Mortgage Association;
       (F) the Federal Home Loan Mortgage Corporation; and
       (G) any other financial institution that the appropriate 
     Federal regulators, jointly, by rule,

[[Page 20400]]

     determine should be treated as a covered financial 
     institution for purposes of this section.
       (e) Exemption for Certain Financial Institutions.--The 
     requirements of this section shall not apply to covered 
     financial institutions with assets of less than 
     $1,000,000,000.
       (f) GAO Study.--
       (1) Study required.--
       (A) In general.--The Comptroller General of the United 
     States shall carry out a study to determine whether there is 
     a correlation between compensation structures and excessive 
     risk taking.
       (B) Factors to consider.--In carrying out the study 
     required under subparagraph (A), the Comptroller General 
     shall--
       (i) consider compensation structures used by companies from 
     2000 to 2008; and
       (ii) compare companies that failed, or nearly failed but 
     for government assistance, to companies that remained viable 
     throughout the housing and credit market crisis of 2007 and 
     2008, including the compensation practices of all such 
     companies.
       (C) Determining companies that failed or nearly failed.--In 
     determining whether a company failed, or nearly failed but 
     for government assistance, for purposes of subparagraph 
     (B)(ii), the Comptroller General shall focus on--
       (i) companies that received exceptional assistance under 
     the Troubled Asset Relief Program under title I of the 
     Emergency Economic Stabilization Act of 2009 (12 U.S.C. 5211 
     et seq.) or other forms of significant government assistance, 
     including under the Automotive Industry Financing Program, 
     the Targeted Investment Program, the Asset Guarantee Program, 
     and the Systemically Significant Failing Institutions 
     Program;
       (ii) the Federal National Mortgage Association;
       (iii) the Federal Home Loan Mortgage Corporation; and
       (iv) companies that participated in the Security and 
     Exchange Commission's Consolidated Supervised Entities 
     Program as of January 2008.
       (2) Report.--Not later than the end of the 1-year period 
     beginning on the date of the enactment of this Act, the 
     Comptroller General shall issue a report to the Congress 
     containing the results of the study required under paragraph 
     (1).

  The SPEAKER pro tempore. After 1 hour of debate on the bill, as 
amended, the amendment printed in House Report 111-237, if offered by 
the gentleman from Massachusetts (Mr. Frank) or his designee, shall be 
considered read, and shall be debatable for 10 minutes equally divided 
and controlled by the proponent and an opponent. Thereafter, the 
amendment in the nature of a substitute printed in the report, if 
offered by the gentleman from New Jersey (Mr. Garrett) or his designee, 
shall be considered read and shall be debatable for 30 minutes equally 
divided and controlled by the proponent and an opponent.
  The gentleman from Massachusetts (Mr. Frank) and the gentleman from 
Alabama (Mr. Bachus) each will control 30 minutes.
  The Chair will recognizes the gentleman from Massachusetts.


                             General Leave

  Mr. FRANK of Massachusetts. 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.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Massachusetts?
  There was no objection.
  Mr. FRANK of Massachusetts. 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.

[[Page 20401]]

  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. BACHUS. 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.''

                              {time}  1000

  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.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. BACHUS. 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

[[Page 20402]]

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.
  The SPEAKER pro tempore. The time of the gentleman has again expired.
  Mr. BACHUS. 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. FRANK of Massachusetts. 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. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from 
South Carolina (Mr. Barrett).
  Mr. BARRETT of South Carolina. Mr. Speaker, I rise today in 
opposition of H.R. 3269, the Corporate and Financial Institution 
Compensation Fairness Act of 2009.
  Restoring confidence in our financial markets is crucial, Mr. 
Speaker, a component in bringing about economic recovery. And I support 
efforts to responsibly address the issues that led to the financial 
crisis that we're facing today.
  However, H.R. 3269 does not do either. Instead of addressing the need 
for smarter regulation, this bill represents further government 
intrusion into the private sector that could ultimately hinder economic 
recovery. If this legislation is passed, it will put in place far-
reaching and permanent government regulations on the compensation 
practices of financial institutions, crippling their ability to recruit 
top talent and remain competitive abroad and here at home.
  Mr. Speaker, this bill goes too far by giving the Federal Government 
the authority to make compensation decisions for a wide range of 
employees in thousands of financial firms across the United States, 
which we can all agree is a far cry from just capping executive pay.
  In tough economic times like these, we need to focus on ways to 
restore confidence in America's financial markets and increase the 
ability of American businesses through responsible policies that 
restore market discipline and discourage excessive risk. I firmly 
believe that we cannot have a successful economic recovery with the 
permanent overreaching regulations that this puts in place by this 
legislation.
  I therefore urge my colleagues to join me in voting ``no'' on this 
legislation.
  Mr. FRANK of Massachusetts. Mr. Speaker, I yield 4 minutes to a 
member of the committee, the gentleman from Georgia (Mr. Scott).
  Mr. SCOTT of Georgia. Mr. Speaker, let me just start out by saying 
this. We're hearing complaints from the other side that we are taking 
over the private enterprise system; we are taking over the free 
enterprise system.
  Let me remind them that it wasn't us that went to the private 
enterprise system. It wasn't the government that went to Wall Street. 
Wall Street came to the government to bail them out from their 
behaviors.
  Now, Mr. Speaker, the American landscape is absolutely littered with 
company after company that has been driven into the ground by 
executives who were greedy, who were selfish, cared only about 
themselves, with these huge salaries, and these companies are left to 
wither on the vine after they have gotten their golden parachutes and 
have landed elsewhere.
  Somebody needs to say something about the American people. This is a 
free enterprise system, but it's not just free for top executives. It's 
free for shareholders. It's free for those men and women who have given 
their lives, their blood, their sweat, and their tears. And to see 
their companies in shambles because of excessive pay by executives who 
have abandoned those companies, what about their pensions? What about 
their retirements that have gone?
  No, Mr. Speaker, this is not about taking over the private enterprise 
system. Mr. Speaker, this is about saving and protecting the free 
enterprise system so that we all can be free to participate in this 
system.
  Mr. Speaker, what we have before us here is something because of the 
fact that financial firms put together compensation packages and 
bonuses that were based on incentives, that were laden with excessive 
risk, that caused our financial crisis and brought this economy to the 
edge of collapse and caused us here in Congress to go and

[[Page 20403]]

get over $2 trillion of the American taxpayers' money to bail them out.
  Now, the first order of business--and this is why this bill that 
Chairman Frank has pushed, and I'm proud to say that we worked on this 
together over 3 years ago. Had we had that bill in place 3 years ago, 
we might not have had this financial crisis, because we would have been 
able to rein in the risky corporate behavior that brought about the 
collapse. So that's what we are doing. We're putting forward some 
reasonable means here.
  What is more reasonable than giving the shareholders a simple say, a 
vote? It's nonbinding. We are not setting the salaries. Even the 
shareholders are not. But don't they have a right? Isn't it their 
company? They are the ones that are pumping the money into it.
  The other feature about the bill, Mr. Speaker, that is very simple, 
very reasonable, is that we require these compensation committees that 
are on these boards to be independent. Right now it's a cozy 
relationship. The CEO refers to them as his board. They're handpicked. 
They are paid $50,000, $100,000, $200,000 to come and sit.
  They need to be independent. And we have rules and regulations in the 
bill that allow for the regulators to determine what these conditions 
will be to make sure they're independent. We make sure that the 
consultants who come in and help set up these compensation packages are 
there.
  The other point that we do, Mr. Speaker, is this, which is very 
important: we also want to make sure that as we move forward in this, 
that risky behavior is disclosed so that we can prevent it.
  It's a very good bill, Mr. Speaker, and I urge its passage.
  Mr. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey (Mr. Lance).

                              {time}  1015

  Mr. LANCE. Mr. Speaker, I rise out of concern for section 4 of this 
bill. We had an amendment in the Rules Committee that I offered with 
the distinguished gentleman from Georgia, and it was ruled out of order 
by the Rules Committee. We believe that the amendment was germane, 
drafted properly and submitted on time. The amendment dealt with 
section 4.
  Regarding section 4, I believe that it is overly broad, and in 
particular I am concerned with the section that says, regarding 
incentive-based compensation, that Federal regulators can review that 
based upon other criteria as the appropriate Federal regulators jointly 
may determine to be appropriate to reduce unreasonable incentives for 
officers and employees to take undue risks.
  In my judgment, that gives too much discretion to Federal regulators, 
and we should be specific as Members of Congress in the statutory basis 
for compensation issues.
  I am also concerned that if this becomes law, that there will be a 
tendency for capital to move away from the United States, particularly 
New York, and to places like London and Asia. This is a matter I have 
discussed previously in the committee, and I certainly believe that we 
should continue to be the place in the world where this type of 
activity occurs.
  Our amendment in no way takes away the other provisions of this bill 
regarding say-on-pay and the independence of compensation boards. But I 
am sorry that our amendment was not considered favorably in the Rules 
Committee and therefore will not be considered favorable here on the 
floor.
  This morning, a report from Bloomberg indicates that the White House 
press secretary, Mr. Gibbs, said yesterday the administration is 
concerned that the measure may give regulators too much say on 
incentive pay. I agree with that sentiment.
  Mr. FRANK of Massachusetts. 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. AL GREEN of Texas. Mr. Speaker, although they are not my words, 
we have heard that it takes an act of Congress to get many things done. 
I would only add to this what I have heard, it also takes a Congress 
willing to act. This is our opportunity to act. This is our opportunity 
to do what Dr. King called ``bending the arc of the moral universe 
toward justice.'' This piece of legislation is just, given the 
circumstances that we have been coping with.
  There is no dispute that many CEOs have had their pay structured such 
that no matter what the consequences of their actions, they were going 
to receive enormous bonuses. I think there are two good reasons to 
support this legislation: one, it deals with the safety and soundness 
of the banking institutions. It performs perfectly if it does just 
this, as far as I am concerned.
  If it allows a banking regulator who sees that the structure of pay 
is impacting the safety and soundness of the institution, if it allows 
this regulator to take some affirmative action to protect the safety 
and soundness of the institution, this piece of legislation is working. 
That is what it is designed to do, not to structure the pay, but to 
prevent the pay from causing ordinary people to have to bail out big 
banks.
  People are expecting us to do something to prevent this from 
happening again. If we are going to act, this is a means by which we 
can act. Talking about that which we cannot do and will not do that is 
not on the agenda will not help us to do what we can do today. I never 
let what I cannot do prevent me from doing what I can do.
  The second reason why I support this legislation: this legislation 
allows shareholders--by the way, I trust shareholders. I think people 
who have a vested interest in something ought to have some say. I think 
they ought to be able to know what the salary structure is and say 
something about it. And in this case it is nonbinding. There are many 
people who are of the opinion that nonbinding is not enough. But I 
trust the shareholders to have an opinion. They have but an opinion. 
They don't do anything to bind the corporation.
  These two reasons, when combined, will help us with the safety and 
soundness of these institutions and give the shareholders an 
opportunity to know how the salaries are structured and have some say.
  Finally, if we want to be a Congress that acts, we have got to have 
courage. These are trying times. These are difficult times. It is easy 
to stay with the status quo. Those who want change have got to be 
willing to take the risk of doing the right thing.
  The arc of the moral universe bends towards justice, but it doesn't 
do so by itself. It does so because of people who are willing to do the 
right thing under unusual and extraordinary circumstances.
  I am going to stand with the chairman. I believe the chairman is 
eminently correct. He has structured a great piece of legislation. 
Those who really want change will vote for this legislation. Those who 
want to see a better system so we don't end up with more headlines that 
read ``bailed out banks gave millions in executive bonuses,'' 
notwithstanding the fact that these banks have not been managed 
properly and could have been managed a lot better, these kinds of 
headlines are going to cause problems for a lot of people.
  I am going to vote with the chairman. I am voting for the bill. It is 
a good bill. It is a just bill.
  Mr. BACHUS. Mr. Speaker, I yield 4 minutes to the gentleman from 
Texas (Mr. Hensarling).
  Mr. HENSARLING. 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

[[Page 20404]]

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?
  The SPEAKER pro tempore. The time of the gentleman from Texas has 
expired.
  Mr. BACHUS. I yield the gentleman 1 additional minute.
  Mr. HENSARLING. 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. FRANK of Massachusetts. 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?

                              {time}  1030

  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. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Campbell).
  Mr. CAMPBELL. I thank the gentleman for yielding, and I hear the 
chairman's comments and remarks. There is no argument with anyone, I 
think, on this floor that executive pay has been an issue, that there 
have been excesses and that there have been problems that have been 
created in companies and the economy with executive compensation. I 
think I would argue

[[Page 20405]]

that rather than excessive risk taking, that it's more about short-term 
thinking instead of long-term thinking, which, by the way, is way 
bigger than just executive pay and is way bigger than the scope of this 
bill, and which this bill will not solve. But that's another issue.
  The question for me is whether this is the right way to deal with it. 
I would argue no, because is the only problem out there in corporate 
governance? Is the only thing that has created problems for companies 
related to executive pay? No. Let's look at General Motors and Chrysler 
and their recent problems. Were their problems created because of 
executive pay? I'm not sure I've heard anybody argue that. But were 
their problems caused, in part at least, because of excessive union 
contracts? Yes. How about with retirement programs that were unfundable 
over time? Yes. What about other companies where perhaps there have 
been legal settlements that have created problems that have been fatal 
or resulted in companies going bankrupt? Those have occurred. How about 
mergers and acquisitions?
  So what are we going to do? Are we going to have shareholders vote on 
pay, on mergers, on acquisitions, on union contracts, on retirement 
pay, on legal settlements, on fees to attorneys? Any of those arguably 
can bring a company down. Should the shareholders have a say on that? 
You know, obviously the shareholders are the ultimate owners of the 
company. If you want to give them a say on pay, fine. Then you'd better 
give them a say on the rest of that. But I'm not sure anybody on this 
floor thinks that that's the right thing to do. The best way for 
shareholders to express their displeasure with the management or 
operation of a company is through the board of directors. That's the 
way it has been done, and that's the way it should be done.
  Mr. SCOTT of Georgia. Mr. Speaker, I yield 3 minutes to the gentleman 
from North Carolina (Mr. Miller).
  Mr. MILLER of North Carolina. I look forward to working with Mr. 
Campbell on giving shareholders much more power over their own 
corporations. There is much more we need to do to reform corporate 
governance in this country. It has been one of many failings of our 
economy in the last year or so.
  Mr. Speaker, I don't want to run corporations, but someone needs to 
set some rules. We need the law to set some rules. We need someone to 
provide some oversight. We need someone to be a watchdog of what they 
are doing because we have found out what happens when there are no 
rules, when there is no oversight, when there is no watchdog. We are 
now in the worst economic downturn since the Great Depression, and we 
have been perilously close to a financial collapse that would have left 
the Great Depression in the shade. And we know what caused it. It's 
essentially the same things that went wrong in the 1920s. Corporate 
executives were looting the country with predatory lending practices to 
make as much money as they possibly could without any regard for the 
consequences; and then corporate executives, in turn, were looting 
their companies to make as much money for themselves as they could. 
They weren't doing right by the American consumers. They weren't doing 
right by their own shareholders. They were only looking after 
themselves. The idea that the corporate executives were acting in the 
best interests of their own shareholders is simply a farce. We saw 
compensation for executives and other top officials who were doing very 
little of any value to society. In fact, their predatory lending 
practices were doing much more harm than good, and it wasn't even to 
the benefit of their shareholders because of the risks that they were 
creating for the corporation, that the short-term profits would lead to 
great risk in a very short while.
  This bill is part of what we need to do. It is only part of what we 
need to do. This just scratches the surface. We need to make sure the 
financial collapse that we have seen in the last year never happens 
again. This bill is only part of it.
  Mr. BACHUS. Mr. Speaker, I yield 3 minutes to the gentleman from 
Delaware (Mr. Castle).
  Mr. CASTLE. I thank the gentleman for yielding.
  Mr. Speaker, I rise in strong opposition to H.R. 3269, the Corporate 
and Financial Institution Compensation Fairness Act. This overreaching 
bill, which is being sold as a response to the financial crisis, would, 
in effect, take away the rights of individual companies to conduct 
business as they see fit. It places government bureaucrats in charge of 
making key decisions about how businesses should be run. We can agree 
that some executives in this country are grossly overpaid; but allowing 
government to make such determinations is counter to everything that 
has made our country great. America has always been an economic 
powerhouse in the world, but this bill restricts competition through 
government intervention in a way that infringes on the entrepreneurial 
spirit of this Nation.
  Section 4 of H.R. 3269 would actually allow the government to involve 
itself in the running of private businesses by empowering Federal 
regulators to prohibit compensation arrangements for all employees of 
all financial institutions, including banks, bank holding companies, 
broker dealers, credit unions and investment advisers. Even regulators 
under the current administration have testified that they do not intend 
to cap pay or set forth ``precise prescriptions for how companies 
should set compensation, which can often be counterproductive.'' 
However, the majority has ignored the administration's wishes by adding 
section 4 to H.R. 3269.
  This bill is a vast overreach and an overreaction to the current 
financial crisis. Like many, I am concerned that executives at a 
handful of large companies, like AIG, have been awarded extravagant pay 
packages and bonuses even after the companies have faced failure and 
received assistance from the Federal Government to the tune of billions 
of taxpayer dollars. In these cases, when Federal assistance has been 
granted, I believe the Federal Government does have a right to mandate 
the pay structure of these firms, which is why I voted for an amendment 
during committee consideration of H.R. 3269 to only apply the 
provisions in the underlying bill to TARP recipients for the amount of 
time that the TARP money is outstanding. Unfortunately this amendment 
was rejected, leaving many financial institutions who did not 
contribute to the current crisis to pay for the mistakes of others.
  Finally, this bill undermines the primacy of State corporate 
governance laws. Corporate law has typically been left up to the 
States, allowing this diversity to foster competition. Passing this 
bill would eliminate these traditions, which run against the American 
free market ideals we have always stood for. For this reason I support 
Mr. Garrett's amendment to allow State law to preempt the underlying 
bill.
  H.R. 3269 was introduced without a single legislative hearing to 
examine its far-reaching implications, despite numerous requests from 
myself and other Members of the Financial Services Committee. I believe 
this legislation may have unintended consequences on our Nation's 
businesses, and I urge my colleagues to vote ``no'' on the underlying 
bill.
  Mr. FRANK of Massachusetts. 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.
  Mr. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Georgia (Mr. Price).
  Mr. PRICE of Georgia. I thank my friend from Alabama for yielding me 
time and for leading on this issue. What we hear from the other side of 
the aisle is this famous old phrase ``trust us,'' right? Now we know 
that folks on the other side don't have any real reluctance to have the 
government run things. We've seen it over and over and over again. In 
fact, we've just heard it from one of the speakers who said, We don't 
want to run private companies, and then he followed that up and said, 
But this is only part of what we need to do.
  Mr. Speaker, the bill has language in it that would, in effect, allow 
the Federal Government to determine pay,

[[Page 20406]]

compensation for employees; and that might be all right if it was just 
companies that were receiving tax money. That might be okay. But in 
fact, it's not. It is so many other companies. Covered financial 
institutions, the definition in the bill would expose companies like 
CVS Caremark--that's right, drugstores--WellCare Health Plans, Value 
Line, Textron, McGraw-Hill Companies, Medco Health Solutions, Lowe's 
Corporation.
  Mr. Speaker, this is another far reach by the Democrats in charge who 
believe that the government knows best, not just about automobile 
companies, not just about energy companies, not just about how to spend 
your money, not just about your health care--they're working on that 
government-run health care plan--but also private companies across this 
land. They believe that they ought to be able to come in and say, Okay, 
this is what you can make, and this is what you can't make.
  If you don't believe it, just read the bill. Nobody is concerned 
about having shareholders give their opinions, have a say about what 
executives make when shareholders own part of that company. That makes 
a whole lot of sense. But what we do have concerns about, grave 
concerns, is the intervention of the Federal Government into one 
business after another after another. This is just another example of 
that. It's a terrible idea. It strikes at the very core of the free 
market principles that have made us the greatest Nation in the history 
of the world. Bad idea, Mr. Speaker. Vote ``no''.
  Mr. FRANK of Massachusetts. 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.
  Ms. SPEIER. I thank the gentleman from Massachusetts.
  In section 4 of the bill, it defines the term ``covered financial 
institutions'' to include depository institutions, broker dealers, 
credit unions and investment advisers but also authorizes the 
appropriate Federal regulators to designate jointly, by rule, other 
financial institutions that are covered. Because this authority is 
granted to appropriate Federal regulators, can we assume that entities 
not regulated by a Federal financial regulator are not intended to be 
``covered financial institutions''?
  Mr. FRANK of Massachusetts. 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. BACHUS. 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. WATT. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Maryland (Mr. Van Hollen).
  Mr. VAN HOLLEN. I thank my colleague from North Carolina for his 
leadership on this issue.
  Mr. Speaker, in this country, we believe that hard work should be 
rewarded, and I think most people in this country believe in the 
concept of pay for performance. But what we've seen on Wall Street over 
the last many years is turning that concept of pay for performance on 
its head. We saw CEOs and the folks in the Wall Street boardrooms 
getting huge bonuses based on short-term gains for their companies, 
even while that excessive risk-taking put those institutions at risk.

                              {time}  1045

  Now, if it was just those institutions, I think we'd say, okay, let 
them take that risk. If they want to overpay their CEOs in the sense 
that the company's going to be put in jeopardy, and it was just that 
company at risk, okay. But what happened is this kind of excessive 
risk-taking went on at the biggest financial institutions of this 
country and put the entire economy at risk, put the financial system at 
risk, and at the end of the day, put all of the taxpayers in this 
country on the line.
  So we all have a stake in changing the system. We all have a stake in 
making sure people get paid for performance, and not paid by putting 
taxpayers in the financial system at risk because, at the end of the 
day, we're all holding the line, not just the CEO and not just the 
shareholders.
  So, Mr. Speaker, it's time to say, enough is enough. Let's pass this 
legislation to protect consumers, shareholders and the taxpayer.
  Mr. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Illinois (Mr. Roskam).
  Mr. ROSKAM. Mr. Speaker, I was minding my own business in my office, 
and I've been listening to this debate and felt like I needed to come 
and just point a couple of things out, some real weaknesses of this 
bill.
  First of all, I'm hearing from manufacturers, Mr. Speaker, in my 
district who are particularly concerned about section 4 of the bill. 
They're making their concerns known through the National Association of 
Manufacturers, and they've said that they are concerned that this bill 
would give authority to government regulatory agencies to review and 
prohibit pay arrangements for a wide range of employees and, as a 
result, they strongly oppose the government intervention in the 
internal dynamics of companies.
  Look, I'm the first to say that if you took bailout money, if you 
took TARP money, fine, be in this category, and those are entities that 
the taxpayers have a right and an expectation to regulate. But when we 
start to use ambiguous terms, terms that are not well-defined, with all 
due respect to the majority, ultimately, we're creating an environment 
where there's going to be more government intervention.
  Why is it that the National Association of Manufacturers says, Don't 
do this to us? They're working hard to create jobs in this country and 
they haven't been able to do it, in part, because of bad policies that 
they've seen come out of Washington, D.C., Mr. Speaker. And we can do 
much, much more.
  Look, in a nutshell, this bill is an invitation for political 
meddling at its worst in the private confines of companies that are 
trying to work hard to create jobs and to create opportunities. You can 
imagine a politician getting

[[Page 20407]]

on the phone with the regulator and saying, You know what, I'm 
interested in you checking into that company because I don't like them 
and I don't like the way that they're doing business.
  We can do better. Let's send this bill back to committee. Let's vote 
``no.''
  Mr. WATT. Mr. Speaker, we have only one final speaker, so we'll 
reserve the balance of our time.
  Mr. BACHUS. Mr. Speaker, at this time I would like to recognize the 
gentleman from New Jersey (Mr. Garrett) for 1\1/2\ minutes.
  Mr. GARRETT of New Jersey. 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. WATT. Mr. Speaker, we reserve the balance of our time.
  Mr. BACHUS. 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. WATT. Mr. Speaker, I yield myself the balance of the time.
  Mr. Speaker, the fact that we are here today debating this bill with 
such vociferous opposition, to me, is a commentary on how out of whack 
our whole system has become.
  First of all, this bill is a modest bill which gives shareholders the 
right to make advisory votes, take advisory votes on compensation. Who 
are these shareholders? They're the owners of the company. They're the 
owners of the company, and somehow, the opponents of this bill are 
trying to convince the public that the owners of a company shouldn't 
have the right to express their opinion to the board about compensation 
of the officers of that company.
  And the bill specifically says, and I'm reading from the bill, The 
shareholder vote shall not be binding on the board of directors and 
shall not be construed as overruling a decision of the board. We're 
just giving them the explicit right to advise the board about 
compensation.
  One gentleman has said that this applies to manufacturers. It doesn't 
apply to manufacturers. Section 4 doesn't apply to manufacturers. And 
even if it did, it would apply only to the extent that they could 
threaten the safety and soundness of a financial institution--
manufacturers are not financial institutions--and only to the extent 
that they could cause serious adverse effects on economic conditions or 
financial stability. And that, I would submit, is an appropriate 
Federal Government role to play, to make sure that we don't get back 
into the kind of meltdown that we are experiencing and have been 
experiencing as a result of greed and irresponsibility in the private 
sector.
  This is not the government taking over the corporate sector, either 
in the financial sector or any other sector of our economy. It is a 
statement by the American people that it's time for us to straighten up 
the ship. We should pass this bill today and move on.
  Mr. GRAYSON. Mr. Speaker, I would like to clarify a point regarding 
H.R. 3269, the Corporate and Financial Institution Compensation 
Fairness Act of 2009. On page 17, the bill states ``No regulation 
promulgated pursuant to this section shall require the recovery of 
incentive based compensation under compensation arrangements in effect 
on the date of enactment of this Act provided such compensation 
agreements are for a period of no more than 24 months.''
  The words ``this section'' are intended to mean the fourth section of 
H.R. 3269, not the section of the U.S. Code in which this provision may 
be found.
  In addition, I would like to add into the Record this important 
statement by Leo Hindery published in the Washington Note, because it 
pertains to this bill.

       President Obama was absolutely right a couple of weeks ago 
     when he demanded that the compensation of the executives, 
     managers and traders at the failed financial institutions 
     that received bail-out cash be scrutinized by a new 
     ``oversight council''. He was right because these are the 
     people who saddled the rest of us with a staggering $2.8 
     billion or more of trading and credit losses, and yet wanted 
     to be paid as if everything was just swell.
       But he and especially his advisers were wrong not to impose 
     specific limits on executive compensation, rather than 
     (mostly) just guidelines. They were especially wrong not to 
     enact permanent limits that apply to all regulated financial 
     institutions and all public companies.
       The evidence is clear that excessive executive and 
     management compensation lies at the root of all corporate 
     crimes and misbehavior, of most of corporate America's 
     inattention to creating and preserving high-quality domestic 
     jobs and fair overall employee compensation, and of almost 
     all of the recent massive trading and credit losses.
       In his speech, Obama also said that government's ``role is 
     not to disparage wealth, but to expand its reach''. He 
     absolutely should have added that its role is also to 
     ``ensure wealth's fair and equitable distribution''.
       For the 35 years following the end of the second world war, 
     CEOs generally viewed responsible and fair business behavior 
     as a critical component of the American dream. And during all 
     those years, and in fact during most of the past century, 
     corporate leaders in the US earned 20 to 30 times as much as 
     their average employees. Even today, the ratio of chief 
     executive pay to average employee earnings in all other main 
     developed countries has remained near this level. The ratio 
     is still only about 22 times in Britain, 20 times in Canada 
     and 11 times in Japan.
       Beginning in the 1990s, however, many US executives, with 
     the complicity of their boards, began to treat management as 
     a separate constituency, often the primary one. Suddenly, 
     fair executive compensation was abandoned in hundreds of 
     corporations and financial institutions.
       In America now, the average public company chief executive 
     earns an almost unbelievable 400 times what his average 
     employee makes, and his officers and senior managers aren't 
     far behind in their own compensation. And now we know that 
     executives and senior managers in the financial services 
     industry drink just as heartily from the same frothy trough.
       Obama and Congress need to enact three changes in executive 
     and management compensation practices, not just hope, as one 
     of his senior advisors recently said, that some (not even 
     all) corporations will voluntarily ``assess risk induced by 
     [their] compensation practices''.
       First, Congress needs immediately to grant public 
     shareholders the right to call shareholders' meetings, to 
     vote out the current

[[Page 20408]]

     board and to pass binding (not simply advisory) votes on 
     executive compensation.
       Second, Congress should establish, for all public 
     companies, a ceiling on individual executive compensation as 
     a reasonable multiple of average employee compensation--say, 
     35 times--and then penalize through tax policies those 
     companies that elect to pay anyone in excess of this 
     multiple.
       Third, Congress should empower the Treasury to oversee the 
     compensation practices of any entity that is regulated, 
     whether or not it currently relies on government guarantees. 
     This should apply to employees at the individual trader 
     level, too.

  Mr. POSEY. Mr. Speaker, I rise to express my concerns about H.R. 
3269, the Corporate and Financial Institution Compensation Fairness Act 
of 2009, as drafted.
  It should not come as a surprise that the American public is outraged 
at those executives who would benefit from lavish compensation packages 
while failing to produce results. Worse still are those executives who 
would deliberately place their own interests above those for whom they 
are accountable. As the land of opportunity, America is a very 
forgiving place for risk and failure, but Americans also believe that 
those who fail should take responsibility for their failures.
  Executives of public companies should have the fiduciary 
responsibility to put the long-term best interests of shareholders 
foremost in all their dealings, and executive compensation committees 
should have the same responsibility.
  The bill before the House, however, goes too far. Section 4 of the 
bill is most troubling. As written and amended, this bill is a 
significant expansion of the power of the federal government to 
micromanage the compensation practices for executives and employees in 
all financial institutions over $1 billion. The bill also has a loosely 
defined definition of financial institutions, potentially opening the 
door to controlling even more companies.
  Despite two requests from me and many of my colleagues on the House 
Financial Services Committee, the Chairman did not even hold a hearing 
on this legislation to address some of these questions. We were unable 
to inquire with federal regulators on how they would interpret their 
newfound duties to judge if compensation is commensurate with the vague 
criteria of ``sound risk management.'' It is thus left to the 
imagination how the federal government would approve or disapprove the 
compensation packages and what other ``unreasonable incentives'' would 
be banned by unelected bureaucrats. It is bewildering, but the United 
States Congress is punting enormous, arbitrary power to the unelected 
bureaucrats to decide how much money people can earn and whether any 
risk they take is ``unreasonable.''
  As we debate financial regulatory reform, it is important that we 
refrain from condemning the free enterprise system which has given us 
the greatest prosperity in the history of the world. The rise of the 
corporation is integral to free markets and the prosperity we enjoy. 
Congress should not pass legislation so sweeping as to micromanage the 
thousands of enterprises which create jobs in our communities and 
produce goods and services we want.
  Unfortunately, the House has rushed a bill to the House floor that 
has not been fully vetted and is filled with vague language that no one 
fully understands. It is no wonder that so much that has passed the 
House has been found unacceptable by the Senate.
  Mr. FRANK of Massachusetts. 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

[[Page 20409]]

     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.''

  Mrs. BACHMANN. Mr. Speaker, I rise in opposition to H.R. 3269.
  This misguided legislation will do nothing to restore confidence in 
our financial markets and could, in fact, undermine our nation's 
economic recovery.
  The bill directs federal financial regulators to literally prohibit 
compensation arrangements it deems ``inappropriate.'' But when did it 
become appropriate for the federal government to take on this role?
  How can we not expect this to stifle the global competitiveness so 
vital to American companies? When American companies are subjected to 
rigid pay structures as set by government bureaucrats and companies in 
other nations are free to follow the market, common sense tells us that 
America's top talent will go elsewhere.
  Furthermore, the bill requires an annual shareholder vote--a non-
binding vote--on executive compensation, which seems terribly 
impractical and complex and may only exacerbate problems, not fix them. 
We're heading down the same road the trial lawyers have led us in the 
courts, and experience tells us that that road leads to a distorted 
market.
  We've heard from groups across the nation on this--from the U.S. 
Chamber of Commerce, which represents more than three million American 
businesses and organizations, to the United Brotherhood of Carpenters 
union. They all say that requiring them to hold an annual shareholder 
vote on compensation is overly burdensome and could actually diminish 
proper due diligence by investors.
  On average, most companies already approve these packages once every 
three years. The Republican alternative, which I support, would honor 
this real-world practice. Our substitute would also allow shareholders 
to opt out of the shareholder triennial advisory vote if two-thirds 
vote to do so. This gives the shareholders more flexibility to decide 
whether they actually want this ``say on pay.'' This is real 
empowerment of the shareholders--not just lip service.
  Finally, our substitute strikes the section of the bill which directs 
government bureaucrats to determine the compensation arrangements of 
private companies rather than its board and shareholders.
  No one on our side of the aisle is for freewheeling pay practices or 
lack of oversight. But, we are calling for balance. We support an 
alternative that would preserve American competitiveness while ensuring 
real transparency and disclosure over compensation packages. The 
majority's legislation is sound-bite governance at best, extending 
onerous regulatory burdens that have little more than the appearance of 
actual empowerment of American shareholders.
  Mr. PAUL. Mr. Speaker, many Americans are justly outraged that Wall 
Street firms that came hat in hand to receive bailouts from the federal 
government rewarded their executives with lavish bonuses. But while 
holding those financial firms accountable to the taxpayers is a 
laudable aim, the legislation before us, H.R. 3269, goes far beyond 
this.
  This is not the first time that Congress has meddled in matters of 
executive compensation, and unfortunately it will not be the last. Just 
like Congress' meddling with the economy, each intervention creates 
unseen problems which, when they crop up, are again addressed by 
legislation that creates further unseen problems, thus continuing the 
cycle ad infinitum. Problems with executive compensation cannot be 
addressed by further burdensome legislation.
  The Wall Street bailouts have already given the federal government 
too much power in corporate boardrooms, and H.R. 3269 is yet another 
step in the wrong direction. While shareholder votes on compensation 
may be non-binding now, once the precedent of government intervention 
on behalf of shareholders is set, there is no reason to believe that 
these votes will not become binding in the future.
  Perhaps even more frustrating is that enforcement of the provisions 
of this bill will be undertaken by overpaid bureaucrats who lack the 
skills to earn comparable salaries in the marketplace by providing 
useful products or services desired by consumers. People who shuttle 
between federal regulator and federally regulated firms, trading on 
their political connections and epitomizing the corruption endemic to 
the government-managed financial system, will be making decisions that 
affect every single public company in this country.
  In order to understand the reasons behind excessive executive 
compensation, we need to take a look at the root causes. The salaries 
and bonuses raising the most ire are those from the financial sector, 
the sector which directly benefits from the Federal Reserve's loose 
monetary policy. Loose monetary policy leads to speculative bubbles 
which drive up stock prices and enrich executives who cash in their 
stock options. It makes debt cheaper, which encourages reckless 
business expansion. And it shuttles money from industries that produce 
valuable products and services to industries that are favored by the 
federal government. H.R. 3269 is a well-intended but misguided piece of 
legislation. Until we strike at

[[Page 20410]]

the root of the problem, we will never get our financial system back on 
a firm footing.
  Ms. JACKSON-LEE of Texas. 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.
  Ms. CLARKE. Mr. Speaker, I rise in support of H.R. 3269, the 
Corporate and Financial Institution Compensation Fairness Act of 2009.
  This legislation is important because it encourages the corporate 
community to address the issue of excessive compensation to high level 
executives by creating greater transparency and giving investors a 
``say on pay.'' Some studies have found that as recently as 2003, CEO 
compensation was 500 times that of an average worker. Even in 2008, a 
year of significant economic decline, the median CEO salary actually 
increased by almost 5% with the average worker's wages went up only 
2.8%.
  This legislation protects the interests of investors, including 
pension and mutual fund participants, giving them an advisory vote on 
executive compensation. Today's legislation comes in response to 
growing concerns in the economic community that excessive executive 
compensation is helping to fuel systemic risk in corporate America. 
These luminaries, including former Fed Chairman Paul Volcker and the 
Group of 30 believe that compensation structures were a factor in the 
current financial crisis. The legislation will not affect smaller 
institutions such as credit unions and companies that hold less than $1 
billion in assets.
  I believe this legislation strikes the right balance in addressing 
executive compensation while protecting the rights of the companies 
that provide so many jobs and are so critical to New York's economy.
  I urge the rest of my colleagues to support this important 
legislation.

[[Page 20411]]

  Mr. BACHUS. Mr. Speaker, the following trade association letters are 
offered for the Record in opposition to H.R. 3269 in order to 
supplement my remarks during debate:

                                                    July 30, 2009.

          To the Members of the U.S. House of Representatives

     Re Opposition to H.R. 3269, Corporate and Financial 
         Institutional Compensation Fairness Act of 2009.

       The undersigned organizations strongly oppose H.R. 3269, 
     the ``Corporate and Financial Institution Compensation 
     Fairness Act of 2009.'' We believe that the bill would result 
     in substantial unintended consequences, especially the 
     mandatory annual vote on pay requirement in section 2 and the 
     precedent-setting authority granted to the federal government 
     over executive and employee compensation in section 4. In 
     sum, we believe the bill would result in a ``one-size-fits-
     all'' approach to compensation that would have substantial 
     negative implications for proper functioning of the corporate 
     governance process, responsible growth, and effective risk 
     mitigation that, when coupled with other proposed 
     legislation, would extend well beyond the financial services 
     industry.
       Each of our organizations fully supports effective measures 
     to increase awareness and mitigation of excessive risk in 
     compensation. We believe that the board of directors, acting 
     through an independent compensation committee, should be 
     responsible for setting compensation because it is so closely 
     linked to business strategy and succession planning. While 
     many have developed and circulated principles to improve 
     compensation and corporate governance, companies across all 
     industries are taking steps to reinforce their understanding 
     of these issues and are taking action to revise practices 
     that may encourage excessive risk taking. Many of these 
     changes, such as majority voting for directors, independent 
     compensation committees, advisory Say on Pay votes, 
     eliminating staggered boards, have been occurring on a 
     company by company basis for a long period of time, without 
     government mandates.


                  Government Control over Compensation

       We oppose Section 4 of the bill because it would give the 
     bank regulatory agencies authority to set the structure and 
     thus the amount of executive and employee compensation 
     provided in the form of incentives. While recognizing the 
     federal government's role in ensuring the safety and 
     soundness of our financial institutions, these provisions 
     would effectively transfer authority for determining how a 
     substantial part of compensation at these firms should be 
     structured from the Board (for executives) and the company 
     (for other employees) to a consortium of regulatory agencies. 
     Our concerns include:
       The adoption of a one-size-fit all approach, which does not 
     accommodate a company-specific approach to pay. The financial 
     industry is expansive, and an incentive structure that may be 
     deemed risky at one organization may be perfectly acceptable 
     at another, depending on the company's business strategy, the 
     risk profile of the organization, and mitigating elements of 
     the total pay program. The legislation instructs the agencies 
     to take a one-size fits all approach by prohibiting pay 
     structures that ``could threaten the safety and soundness of 
     covered financial institutions.''
       Even if a company-specific approach were taken, the federal 
     government has neither the experience nor expertise to set 
     executive compensation arrangements for a wide variety of 
     financial institutions. The legislation will replace the 
     informed judgment of the board of directors and compensation 
     committee with the cursory knowledge of a federal regulator, 
     eroding the authority of the board and its ability to closely 
     tailor compensation to the company.
       The Obama Administration did not ask for such expansive 
     authority, no doubt a result of the interpretive and 
     enforcement problems created by the poorly crafted executive 
     compensation restrictions in the American Recovery and 
     Reinvestment Act, which caused several companies to shift 
     more pay to guaranteed salary, rather than reasonable 
     performance-based incentives, in order to comply.
       In addition, because our associations represent companies 
     across a variety of industries, we are also extremely 
     concerned that this model of pay regulation would expand to 
     other industries or situations, further putting the federal 
     government in control of pay decisions for private companies. 
     This legislation would establish a form of compensation 
     regulation for employees who interact with consumers. Rather 
     than creating a new bureaucracy, we believe a more effective 
     approach to regulating risk in incentives would be to 
     establish a clear set of principles for mitigating risk 
     against which the regulatory agencies could review pay 
     arrangements.


                     A Mandatory Annual Vote on Pay

       Beyond section 4 of the bill, we also oppose an annual 
     mandatory shareholder vote on executive compensation because 
     it does not achieve the ends sought by proponents, is not 
     sought by a majority of shareholders, and would not improve 
     clear communication between shareholders and the board. While 
     we oppose the requirement embodied in H.R. 3269, there may be 
     viable alternatives that were unable to be explored with the 
     limited time frame taken by the House Financial Services 
     Committee in considering this legislation.
       The Board of Directors has a fiduciary duty for managing 
     the company on behalf of all shareholders. The board's 
     compensation committee is responsible for linking 
     compensation incentives to confidential business strategy, 
     aligning pay with the assessment of individual executive 
     performance, and using long-term incentives to support the 
     company's succession planning process. Annual say on pay 
     votes would push compensation structures away from a company-
     specific approach to ``cookie-cutter'' arrangements designed 
     to ensure a high vote total.
       Despite the economic environment, shareholder resolutions 
     seeking a say on pay have only received a majority support at 
     roughly 30 percent of the companies at which they were 
     offered in 2009. A 2008 independent study by a leading 
     academic found that among large institutional investors, only 
     25 percent supported a shareholder vote.
       An annual mandatory vote requirement in the United Kingdom 
     has not reduced the overall level of compensation and has 
     resulted in less of a link between pay and performance.
       Congressional attempts to regulate amounts or structures of 
     compensation have typically backfired--increasing 
     compensation or changing practices in unforeseen ways 
     contrary to the intent of the restrictions. One need look no 
     further then the history of stock options as a case study of 
     this premise. While we oppose H.R. 3269 in its current form, 
     because the legislation has been available for only a short 
     time, we believe that more time is warranted to give Congress 
     and interested parties an opportunity to fully analyze and 
     discuss the potential for harmful unintended consequences.
       Thank you for your consideration of our views. We look 
     forward to working with you on this and other legislation.
           Sincerely,
         Center for Executive Compensation, National Association 
           of Manufacturers, Retail Industry Leaders Association, 
           U.S. Chamber of Commerce.
                                  ____
                                  
                                        Chamber of Commerce of the


                                     United States of America,

                                    Washington, DC, July 27, 2009.
     Hon. Barney Frank,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
      Hon. Spencer Bachus,
     Ranking Member, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Chairman Frank and Ranking Member Bachus: The U.S. 
     Chamber of Commerce, the world's largest business federation 
     representing more than three million businesses and 
     organizations of every size, sector, and region, believes 
     that strong corporate governance is an important part of the 
     foundation for a vibrant and growing economy. In February, 
     the Chamber issued a Statement of Principles providing, among 
     other things, that executive compensation should balance 
     individual accomplishment, corporate performance, adherence 
     to risk management, compliance with laws and regulations, and 
     the creation of shareholder value. The complete Statement of 
     Principles is attached. The Chamber opposes H.R. 3269, the 
     ``Corporate and Financial Institution Compensation Fairness 
     Act of 2009,'' because it is inconsistent with these 
     Principles.
       Section 4 of H.R. 3269, particularly when read in 
     conjunction with the compensation provisions proposed in H.R. 
     3126, the ``Consumer Fairness Protection Agency Act of 
     2009,'' would establish direct government control and 
     regulation of compensation for executives and workers alike. 
     Employee compensation should be a decision by appropriate 
     levels of management or the board of directors on a variety 
     of factors such as merit, promotions, or cost of living 
     increases. Furthermore, changes in corporate governance 
     should occur through a dialogue between management, 
     directors, and shareholders, as allowed by controlling state 
     corporate law. The Chamber does not believe that the command 
     and control regulatory scheme set forth in this legislation 
     would lead to the economic growth and job creation that 
     America desperately needs.
       The Chamber is particularly concerned with a number of 
     provisions in H.R. 3269 and offers the following 
     recommendations:
       1. This legislation would have federal agencies regulate 
     the compensation of a vast number of employees of covered 
     firms. Pursuant to H.R. 3269, financial services firms would 
     be required to submit practices and plans for incentive 
     compensation for employees to their appropriate regulator. 
     The regulator would then have the authority to approve or 
     disapprove such plan, as well as take action for violations. 
     In many firms, because incentive compensation plans range 
     from the CEO to the receptionist, these provisions would 
     place the federal government in the position of regulating 
     compensation for all, or a vast majority of, employees in a 
     company. This would be particularly intrusive when coupled 
     with the provisions of H.R. 3126 which would allow the 
     proposed

[[Page 20412]]

     Consumer Financial Protection Agency to regulate the 
     compensation of employees who interact with consumers, 
     regardless of industry, such as real estate agents, or even 
     cashiers who accept credit cards. Taken together, these two 
     proposed bills constitute an unprecedented governmental 
     intrusion into matters that have historically been addressed 
     by private actors.
       2. The ``Say on Pay'' provisions can be improved by making 
     the votes triennial and providing for a 5-year opt-out if 
     approved by a super-majority of shareholders. The Chamber 
     believes that the ``Say on Pay'' provisions of H.R. 3269 can 
     be improved. Currently, the bill requires an annual advisory 
     vote at every company in the United States, regardless of 
     size, industry, history, and governance. Rather, Congress 
     should require such an advisory vote every three years, 
     thereby tracking the typical life-span of an average 
     executive compensation package. This change would give 
     shareholders a more informed voice in the executive 
     compensation policies of a company. The Chamber also believes 
     that adding an opt-out provision is warranted. For example, 
     if two-thirds of shareholders vote for a 5-year opt-out of 
     ``Say on Pay'' votes, small and mid-size companies would be 
     able to mitigate the undue costs and distractions associated 
     with an annual vote.
       3. Federal Law should not create a pre-emption if state 
     corporate law contains mechanisms for independent 
     compensation committees. State corporate law has fostered a 
     diverse set of corporate governance structures that have 
     allowed the American economy to be the richest and most 
     productive in world history. While the governance structures 
     of some financial services firms have been questioned, 97 
     percent of the more than 15,000 public companies in the 
     United States have had nothing to do with the financial 
     crisis. Accordingly, the Chamber believes that the 
     legislation should not preempt state law.
       The Chamber believes these recommendations would represent 
     significant improvements to the bill and assist in providing 
     strong corporate governance policies needed for a growing 
     economy.
       The Chamber also supports the Garrett substitute amendment 
     to the bill, which would allow for improved Say on Pay and 
     Independent Compensation Committee provisions, while 
     stripping Section 4 of the bill. Finally, the Chamber 
     supports the Garrett amendment to strike Section 4 of the 
     bill, removing those provisions that would regulate incentive 
     compensation practices.
       The Chamber strongly supports corporate governance reforms 
     in line with our Statement of Principles, but urges you to 
     oppose H.R. 3269 because it is inconsistent with these 
     Principles on corporate governance.
           Sincerely,
                                                  R. Bruce Josten.
                                 ______
                                 
                                           National Association of


                                        Federal Credit Unions,

                                     Arlington, VA, July 28, 2009.
     Re Comments on H.R. 3269 as pending in mark-up.

     Hon. Barney Frank,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
     Hon. Spencer Bachus,
     Ranking Member, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Chairman Frank and Ranking Member Bachus. Mr. 
     Chairman, I am writing on behalf of the National Association 
     of Federal Credit Unions (NAFCU), the only trade association 
     that exclusively represents the interests of our nation's 
     federal credit unions, in conjunction with H.R. 3269, the 
     Corporate and Financial Institution Compensation Fairness Act 
     of 2009 as amended so far in mark-up.
       NAFCU continues to oppose the bill, as amended, in its 
     current form. While the adoption of the Hensarling amendment, 
     exempting institutions under $1 billion in assets from the 
     scope of Section 4 of the legislation was a step in the right 
     direction, we continue to urge the Committee to amend this 
     legislation so that it does not apply to credit unions.
       As not-for-profit, member-owned cooperatives, credit unions 
     were not the cause of the current financial crisis. The 
     success of the credit union industry in this regard can be 
     attributed not only to its structure and nature, but to the 
     fact that credit unions, unlike for-profit entities, are 
     singularly focused on service to their members and do not 
     chase stock returns. In fact, credit unions do not issue 
     stock at all. Furthermore, they are governed by a volunteer 
     board of credit union member directors that serve generally 
     without remuneration and ultimately decide the compensation 
     for key employees of the credit union. It is therefore 
     critical that non-profits be treated differently than for-
     profit entities.
       Quite frankly, those running for-profit entities, including 
     community banks, have a profit motive that can open the door 
     for abuse. In stark contrast, not-for-profit cooperatives 
     quite simply have different motives, which substantially 
     lessen the incentive for abuse.
       NAFCU continues to believe that the inclusion of credit 
     unions as covered institutions under Section 4 of the 
     legislation and provisions requiring NCUA to prescribe joint 
     regulations in conjunction with other regulators who 
     supervise for-profit, stock-issuing entities, does not make 
     sense. Simply stated, credit unions are not guided by the 
     profit motive or stock price manipulation to which this 
     legislation is aimed.
       It is with that in mind that we continue to oppose the 
     legislation in its current form and urge the Committee to 
     amend Section 4 of H.R. 3269 to exempt credit unions from 
     this legislation. Without a current amendment pending before 
     the Committee to do this, we would support adoption of either 
     the Neugebauer or Castle amendments to strike Section 4 of 
     the bill. Conversely, if Section 4 is maintained by the 
     Committee, we would urge further amending H.R. 3269 to exempt 
     credit unions from Section 4 prior to consideration on the 
     House floor. If one of these changes were to be made, NAFCU 
     could support the legislation going forward.
       NAFCU appreciates the opportunity to share our thoughts on 
     this important topic and we look forward to working with you 
     and your staff to address our concerns.
       Should you have any questions or require any additional 
     information please do not hesitate to contact me or Brad 
     Thaler, NAFCU's Director of Legislative Affairs.
           Sincerely,
                                              Fred R. Becker, Jr.,
                                                    President/CEO.
                                  ____
                                  


                                                         CUNA,

                                    Washington, DC, July 24, 2009.
     Hon. Barney Frank,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
     Hon. Spencer Bachus,
     Ranking Member, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Chairman Frank and Ranking Member Bachus: On behalf of 
     the Credit Union National Association (CUNA), I am writing 
     regarding H.R. 3269, the Corporate and Financial Institution 
     Compensation Fairness Act of 2009. CUNA represents nearly 90 
     percent of America's 8,000 credit unions and their 92 million 
     members.
       We understand the concern some have regarding the effect 
     compensation structures that encourage excessive risk-taking 
     have on the safety of financial institutions and the economy. 
     We applaud efforts to address these egregious practices. 
     However, as the Committee prepares to consider H.R. 3269 next 
     week, we encourage you to exclude credit unions from the 
     scope of the bill. The credit union structure combined with 
     strong compensation regulations already in place have 
     resulted in credit unions being largely immune from both 
     excessive and unsafe risk-taking and from the criticism 
     assigned to for-profit financial services providers; thus, 
     the inclusion of credit unions under H.R. 3269 is 
     unwarranted.
       As you know, credit unions are unique, member-owned, not-
     for-profit, financial cooperatives, and they simply do not 
     have the same operational motives as for-profit depository 
     institutions. As a result, credit unions are risk-averse 
     institutions operating in the best interest of their members. 
     Further, the compensation structure of credit unions is not 
     only less aggressive than the for-profit financial 
     institutions, it is also more modest. According to our most 
     recent survey of our members, the median salary for a credit 
     union CEO is approximately $71,000; the average salary is 
     approximately $93,000.
       The National Credit Union Administration Board (NCUA) 
     already has compensation regulations in place that are 
     designed to prevent the types of dangerous compensation 
     structures that exist in other sectors. These include Section 
     701.21(c) of NCUA's Rules and Regulations, restricting 
     compensation related to loans to members and lines of credit 
     to members; Section 701.33, restricting compensation to 
     credit union board members; and Section 712.8, restricting 
     compensation to credit union employees or board members from 
     credit union service organizations in which the credit union 
     has an outstanding loan or investment.
       We believe that H.R. 3269, if applied to credit unions, 
     would at best be duplicative of current regulations and at 
     worse could increase the cost and regulatory burden on a 
     sector of the financial services industry that neither caused 
     the economic crisis nor engaged in the type of compensation 
     arrangements that this legislation seeks to address. 
     Therefore, we cannot support this legislation in its current 
     form and we would welcome the opportunity to work with you 
     and others on the Financial Services Committee to amend the 
     legislation to exclude credit unions.
       On behalf of America's credit unions and their 92 million 
     members, thank you very much for your consideration.
           Sincerely,
                                                   Daniel A. Mica,
                                                  President & CEO.

[[Page 20413]]

                                  ____
                                  
                                                     The Financial


                                          Services Roundtable,

                                    Washington, DC, July 23, 2009.
     Hon. Barney Frank,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
     Hon. Spencer Bachus,
     Ranking Member, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Chairman Frank and Ranking Member Bachus: The House 
     Financial Services Committee is scheduled to mark up H.R. 
     3269, the Corporate and Financial Institution Compensation 
     Fairness Act of 2009, on Tuesday morning. The Financial 
     Services Roundtable supports the spirit of this legislation, 
     and the mutual goals of promoting corporate accountability 
     and good governance practices; however, we must oppose H.R. 
     3269. Compensation programs are an important tool in the 
     financial services industry used to recruit and retain 
     skilled employees. These programs should be aligned with the 
     overall safety and soundness of the organization as well as 
     shareholder interest. The Roundtable supports and promotes 
     such goals as outlined in our Principles on Executive 
     Compensation (see attached).
       We have serious concerns about H.R. 3269 as drafted, 
     including the requirement for Federal regulators to determine 
     the types of compensation structures that are appropriate for 
     financial institutions. Decisions regarding incentive 
     compensation programs should be designed uniquely by 
     corporations and their compensation committees to account for 
     respective shareholder interest; long term sustainable, firm-
     wide success; and the time horizon of risks. Federal 
     regulators currently require disclosure on the details and 
     types of executive compensation arrangements, and specific to 
     financial institutions, require that such arrangements be 
     consistent with safety and soundness guidelines. The 
     Roundtable believes the existing authority currently being 
     exercised by Federal regulators is appropriate and in line 
     with protecting consumer and shareholder interests alike.
       We appreciate your review and consideration of these 
     concerns as the committee prepares to consider H.R. 3269. 
     Please feel free to call on me if I can be of assistance or 
     answer any questions.
           Best Regards,
                                                   Steve Bartlett,
                                                President and CEO.
                                  ____
                                  
                                               Center on Executive


                                                 Compensation,

                                    Washington, DC, July 27, 2009.
     Re H.R. 3269, Corporate and Financial Institutional 
         Compensation Fairness Act of 2009.

     Hon. Barney Frank,
     Chairman, House Financial Services Committee, Rayburn House 
         Office Building, Washington, DC.
     Hon. Spencer Bachus,
     Ranking Member, House Financial Services Committee, Rayburn 
         House Office Building, Washington, DC.
       Dear Chairman Frank and Ranking Member Bachus: On behalf of 
     the Center on Executive Compensation, I am writing to express 
     the Center's opposition to H.R. 3269 because of the far-
     ranging effects it will have on the U.S. system of corporate 
     governance and effective compensation policies. We are 
     particularly concerned about the provisions of the bill that 
     impose an annual mandatory vote on pay and direct the Federal 
     government to prohibit compensation arrangements in the 
     financial services industry.
       As you know, the Center is a research and advocacy 
     organization that seeks to provide a reasoned perspective on 
     executive compensation policy and practice issues from the 
     viewpoint of the senior human resource officers of large 
     companies. The Center's public policy positions are developed 
     with the help of its Subscribers to ensure a practical view 
     that is also informed by its principles. The Center believes 
     that a Board-centric approach to developing and disclosing a 
     clear link between pay and performance and for mitigating 
     excessive risk in executive compensation plans is far 
     preferable to having pay set by the Federal government.
       Mandated Annual Vote On Pay Will Weaken Corporate 
     Governance. The Center opposes mandated annual shareholder 
     vote on executive compensation in Section 2 of the bill 
     because it would encourage the adoption of ``cookie cutter'' 
     pay arrangements rather than arrangements carefully tailored 
     to the company and is not sought by a majority of 
     shareholders. Specifically, a mandatory vote on pay:
       Would Move the U.S. Toward a System of Governance by 
     Referendum. Boards of Directors, acting through an 
     independent compensation committee, discharge their fiduciary 
     duty to manage executive compensation on behalf of all 
     shareholders by tying the amount and form of compensation to 
     confidential business strategy, evaluating individual 
     executive performance and using pay levers to manage the 
     company's succession planning process. A mandatory vote on 
     pay seeks to substitute the judgment of the shareholders for 
     the informed judgment of the Board and is likely to open the 
     door to more shareholder votes on other issues, such as where 
     to expand or research and development decisions.
       Would Result in a Cookie-Cutter Approach to Pay. In order 
     to have an informed view on pay, institutional investors and 
     others faced with an annual nonbinding vote on pay would be 
     required to analyze 30-50 pages of disclosure for thousands 
     of companies. Many will rely instead on the recommendation of 
     proxy advisory services, which have their own views of how 
     pay should be structured. In order to ensure substantial 
     support, compensation committees will adopt pay arrangements 
     designed to get a high vote rather than be tailored to the 
     company.
       Fails to Recognize That a Majority of Shareholders Have Not 
     Supported Shareholder Resolutions in 2009. Despite the 
     current economic environment, shareholder resolutions asking 
     companies to adopt an annual vote on pay have not received 
     majority support on average, with only 30 percent of the 
     votes receiving majority support.
       Ignores Research Results That Show the Largest 
     Institutional Investors Do Not Favor Say on Pay. A 2008 
     research study by Cornell University Professor Kevin Hallock 
     of large institutional investors showed that 50 percent 
     opposed say on pay while just 25 percent supported it. 
     Responses such as the following were typical ``It is not 
     clear A, what we are voting on and B, what others are voting 
     on. We can have a much more individual discussion and nuanced 
     discussion'' [with the Board].
       Has Not Reduced Pay Levels in the UK An annual mandatory 
     vote requirement in the United Kingdom has not reduced the 
     overall level of compensation (the FTSE 100 experienced a 7% 
     pay increase in 2008, while in the U.S., the S&P 500 
     experienced a 6.8 percent decline) and has resulted in less 
     of a link between pay and performance.
       Government Control Over Compensation Sets A Dangerous 
     Precedent. The Center also opposes Section 4 of the 
     legislation and believes it should be removed in favor of a 
     principles-based approach to mitigating excessive risk in 
     incentives. Section 4 would give the Federal banking 
     regulatory agencies the extraordinary authority to prohibit 
     pay structures and arrangements for executives and 
     individuals as well as pass judgment on specific compensation 
     arrangements. Because the impact of different pay structures 
     will have different effects based on the risk profile of the 
     organization, the time horizon of the products or services 
     sold and other considerations, banning all pay structures 
     across the entire industry is likely to have significant 
     unintended consequences and sets a dangerous precedent for 
     federal regulation of compensation in other contexts.
       We are also concerned that the proposed disclosure will 
     result in a one-size-fits-all approach to compensation. There 
     are six regulators responsible for developing and 
     implementing the prohibitions and acceptable practices 
     required in the bill. So far, they have not been able to 
     agree on their respective responsibilities under the 
     forthcoming regulatory restructuring. With this in mind, it 
     is likely that in order to come to agreement on the pay 
     practices that should be banned, the regulators will need to 
     adopt a standardized approach to acceptable executive 
     compensation arrangements and therefore mute the ability of 
     companies to set forth a reasoned and reasonable approach to 
     pay for performance.
       The Center fully supports the mitigation of risk in 
     incentives, as articulated in the attached checklist for 
     compensation committees. The Center believes that mitigating 
     risk is a matter of balance on a number of fronts, including 
     balance among the type of metrics measuring performance, 
     balance between short- and long-term compensation and balance 
     in ensuring incentives focus on the time horizon of risk. 
     These are decisions best made by the Board Compensation 
     Committee and disclosed in the annual proxy statement. As you 
     know, the SEC is in the process of enhancing its disclosures 
     of excessive risk in incentives for employees and executives 
     that covers all employers.
       Finally, it is worth noting that previous well-intended 
     Congressional attempts to regulate amounts or structures of 
     compensation have typically backfired--increasing 
     compensation or changing practices in unforeseen ways 
     contrary to the intent of the restrictions. A good example is 
     the executive compensation restrictions included in the 
     American Recovery and Reinvestment Act, which encourage 
     greater salaries, rather than a careful pay for performance 
     orientation. Because H.R. 3269 has been available for only 
     one week, we believe that more time is warranted to give the 
     Committee and interested parties an opportunity to fully 
     analyze and discuss the potential for harmful unintended 
     consequences.
       Thank you for your consideration of our views. We look 
     forward to working with you on this and other legislation.
           Sincerely yours,
                                                 Timothy J. Bartl,
                        Senior Vice President and General Counsel.

  The SPEAKER pro tempore. All time for debate has expired.


         Amendment No. 1 Offered by Mr. Frank of Massachusetts

  Mr. FRANK of Massachusetts. Mr. Speaker, I offer an amendment.
  The SPEAKER pro tempore (Mr. Holden). The Clerk will designate the 
amendment.

[[Page 20414]]

  The text of the amendment is as follows:

       Amendment No. 1 printed in House Report 111-237 offered by 
     Mr. Frank of Massachusetts:
       Page 3, line 8, strike ``(a) Amendment.--''.
       Page 7, strike lines 1 through 14.
       Page 17, after line 4, insert the following:
       (f) Limitation.--No regulation promulgated pursuant to this 
     section shall require the recovery of incentive-based 
     compensation under compensation arrangements in effect on the 
     date of enactment of this Act, provided such compensation 
     agreements are for a period of no more than 24 months. 
     Nothing in this Act shall prevent or limit the recovery of 
     incentive-based compensation under any other applicable law.
       Page 17, line 5, strike ``(f)'' and insert ``(g)''.
  The SPEAKER pro tempore. Pursuant to House Resolution 697, the 
gentleman from Massachusetts (Mr. Frank) and a Member opposed each will 
control 5 minutes.
  The Chair recognizes the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. 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.
  Mr. PRICE of Georgia. Mr. Speaker, I claim the time in opposition.
  The SPEAKER pro tempore. The gentleman from Georgia is recognized for 
5 minutes.
  Mr. PRICE of Georgia. Mr. Speaker, the debate on this amendment is 
very appropriate and germane to the actions of this entire Congress. 
The amendment that was offered in committee in good faith, to try to 
make certain that there weren't any changes that could be made 
retroactively to compensation packages and incentive pay, was very 
specific.
  It said that no compensation of any executive having been approved by 
a majority of the shareholders may be subject to any callback, which is 
the retroactivity, unless it was part of the contract or unless there 
had been fraud committed. And that's what was accepted by committee, 
Mr. Speaker, accepted by committee.
  The amendment was put into the bill with the caveat that the chairman 
wanted, potentially, a few changes. And I would quote from the 
chairman, who said, The impulse to retroactivity is not one of our 
finest and ought to be constrained. And he said, We could work together 
to make sure this does not derogate from the SEC prospectively to say 
that you can't do this kind of thing.
  Well, Mr. Speaker, I'm here to tell you that there weren't any 
discussions before the Rules Committee met. There weren't any 
discussions before the amendment that we now have before us was offered 
as the apparently good-faith effort to the amendment that was offered 
and adopted in a bipartisan manner majority in the committee. And what 
does the new amendment say? It says, No regulation promulgated pursuant 
to this section shall require the recovery of incentive-based 
compensation under compensation arrangements in effect as of the date 
of the enactment of this act.
  Now, what does that mean? Well, it means that the SEC, that is the 
Federal Government, Mr. Speaker, will be able to dictate pay, dictate 
pay because of the language of this amendment, to publicly held 
companies. Now, that may be okay if they take tax money, Federal tax 
money, but this would be publicly traded companies that don't take a 
dime of tax money.
  Mr. Speaker, this is a huge step in the wrong direction. Section 4 is 
the area of this bill that we have great concerns about. It puts the 
Federal Government, it puts the SEC into the agreements for 
compensation for executives in publicly traded companies. It cuts at 
the very core of our free market system.
  I would urge a ``no'' vote on the amendment.
  I reserve the balance of my time.

                              {time}  1100

  Mr. FRANK of Massachusetts. How much time remains?
  The SPEAKER pro tempore. The gentleman from Massachusetts has 4 
minutes remaining, and the gentleman from Georgia has 2\1/2\ minutes 
remaining.
  Mr. FRANK of Massachusetts. Who has the right to close, Mr. Speaker?
  The SPEAKER pro tempore. The gentleman from Georgia has the right to 
close.
  Mr. FRANK of Massachusetts. 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. MILLER of North Carolina. Mr. Speaker, it may be that the 
amendment was offered in good faith, but the explanation for the 
amendment had very little to do with what the amendment actually says. 
This amendment, Mr. Frank's amendment, does accomplish the reason or 
the argument in favor of the amendment.
  We don't think that a regulator or regulation should require the 
recovery of incentive-based pay where the existing contract doesn't 
require it. We shouldn't change contracts retroactively, existing 
contracts retroactively, but we also don't need to undermine the 
existing law that may provide for that.
  Mr. Frank mentioned the SEC. The SEC is now trying to recover money 
that was paid supposedly because transactions were profitable when, in 
fact, they weren't because of the accounting. So we don't want to 
reward accounting irregularities. Going forward, the regulators may 
well decide that an effective constraint on imprudent risk-taking is to 
require longer horizons for incentive-based pay.
  That is the purpose of this amendment. It is what this amendment 
actually accomplishes. It is consistent with the reasons given in 
committee for the original amendment.
  Mr. PRICE of Georgia. Mr. Speaker, I continue to reserve the balance 
of my time.
  Mr. FRANK of Massachusetts. 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.
  Mr. PRICE of Georgia. Will the gentleman yield?

[[Page 20415]]


  Mr. FRANK of Massachusetts. Yes.
  Mr. PRICE of Georgia. Given the agreement that you and I have reached 
on language, what is the posture about changing the language on this 
amendment? Is that a unanimous consent?
  Mr. FRANK of Massachusetts. 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.''
  The SPEAKER pro tempore. Will the gentleman submit that language to 
the desk?
  Mr. FRANK of Massachusetts. Yes.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Mr. FRANK of Massachusetts. That's easy for you to say, Mr. Speaker.
  Mr. PRICE of Georgia. Mr. Speaker, until that language has been 
introduced, I will reserve the balance of my time.


                         Parliamentary Inquiry

  Mr. PRICE of Georgia. Mr. Speaker, I have a parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state his inquiry.
  Mr. PRICE of Georgia. Has the language that has been offered at the 
desk been introduced as business allows?
  Mr. FRANK of Massachusetts. 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.
  The SPEAKER pro tempore. The Clerk will report the modification.
  The Clerk read as follows:

       Modification to amendment No. 1 offered by Mr. Frank of 
     Massachusetts:
       On line 2 of the matter proposed to be inserted, after 
     ``shall'' insert ``be allowed to''.

  The SPEAKER pro tempore. Without objection, the amendment is 
modified.
  There was no objection.
  The text of the amendment, as modified, is as follows:

       Page 3, line 8, strike ``(a) Amendment.--''.
       Page 7, strike lines 1 through 14.
       Page 17, after line 4, insert the following:
       (f) Limitation.--No regulation promulgated pursuant to this 
     section shall be allowed to require the recovery of 
     incentive-based compensation under compensation arrangements 
     in effect on the date of enactment of this Act, provided such 
     compensation agreements are for a period of no more than 24 
     months. Nothing in this Act shall prevent or limit the 
     recovery of incentive-based compensation under any other 
     applicable law.
       Page 17, line 5, strike ``(f)'' and insert ``(g)''.

  Mr. PRICE of Georgia. Mr. Speaker, I thank the gentleman, the 
chairman, for his desire and willingness to work together on this.
  That being said, the challenges with section 4 are huge. The far 
reach of the SEC and the ability of the Federal Government now to get 
into the executive compensation packages for businesses for which there 
is no Federal money involved is remarkable in its extent. As we know, 
the Democrat majority has a great desire to have the government 
everywhere in our lives, whether it's in financial institutions, 
whether it's in energy companies or whether it's that the American 
people have to pay to turn on and off their light switches.
  I just picked up the paper this morning, Mr. Speaker, and saw that 
there is an op-ed in The Wall Street Journal which talks about health 
reform and cancer and about how, if the Federal Government is allowed 
to control health care, it may result in decreasing innovation in the 
area of cancer.
  I would suggest, Mr. Speaker, that if the Federal Government is 
allowed in this arena that what we will see is a huge, depressing 
effect on the ability of businesses all across this land to be able to 
create the most vibrant, entrepreneurial and active businesses that 
inure to the benefit of the American people, that create jobs and that 
allow us to remain the greatest Nation in the history of the world. 
It's just little bits that chip away at the fabric of our Nation that 
make it so that it is impossible to continue to compete on an 
international basis.
  So, Mr. Speaker, I am pleased that the chairman was willing to 
clarify the amendment. However, it still gets to the heart of whether 
or not we are going to allow the Federal Government into decisions that 
ought to be left in a free market and in a private-sector arrangement, 
so I urge the defeat of the amendment.
  I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the amendment offered by 
the gentleman from Massachusetts (Mr. Frank), as modified.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded Vote

  Mr. PRICE of Georgia. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to House Resolution 697, further 
proceedings on this question will be postponed.


Amendment in the Nature of a Substitute No. 2 Offered by Mr. Garrett of 
                               New Jersey

  Mr. GARRETT of New Jersey. Mr. Speaker, I have an amendment at the 
desk.
  The SPEAKER pro tempore. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment in the nature of a substitute No. 2 printed in 
     House Report 111-237 offered by Mr. Garrett of New Jersey:
       Strike all after the enacting clause and insert the 
     following:

     SEC. 1. SHORT TITLE.

       This Act may be cited as the ``Corporate and Financial 
     Institution Compensation Fairness Act of 2009''.

     SEC. 2. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION.

       (a) Amendment to the Securities Exchange Act of 1934.--
     Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 
     78n) is amended by adding at the end the following new 
     subsection:
       ``(i) Triennial Advisory Shareholder Vote on Executive 
     Compensation.--
       ``(1) In general.--A proxy or consent or authorization for 
     an annual meeting of the shareholders to elect directors (or 
     a special meeting in lieu of such meeting) occurring on or 
     after the date that is 6 months after the date on which final 
     rules are issued under paragraph (4), shall provide for a 
     separate shareholder advisory vote, at least once every 3 
     years, to approve the issuer's executive compensation 
     policies and practices as set forth pursuant to the 
     Commission's disclosure rules. The shareholder vote shall be 
     advisory in nature and shall not be binding on the issuer or 
     its board of directors and shall not be construed as 
     overruling a decision by such board, nor to create or imply 
     any additional fiduciary duty by such board, nor shall such 
     vote be construed to restrict or limit the ability of 
     shareholders to make proposals for inclusion in proxy 
     materials related to executive compensation for meetings of 
     shareholders at which such an advisory vote on executive 
     compensation is not to be conducted.
       ``(2) Opt out.--If not less than \2/3\ of votes cast at a 
     meeting of shareholders on a proposal to opt out of the 
     triennial shareholder advisory vote on executive compensation 
     required under paragraph (1) are cast in favor of such a 
     proposal, then such shareholder advisory vote required under 
     such paragraph shall not be required to take place for a 
     period of 5 years following the vote approving such proposal.
       ``(3) Shareholder approval of golden parachute 
     compensation.--
       ``(A) Disclosure.--In any proxy or consent solicitation 
     material for a meeting of the shareholders occurring on or 
     after the date that is 6 months after the date on which final 
     rules are issued under paragraph (4), at which shareholders 
     are asked to approve an acquisition, merger, consolidation, 
     or proposed sale or other disposition of all or substantially 
     all the assets of an issuer, the person making such 
     solicitation shall disclose in the proxy or consent 
     solicitation material, in a clear and simple tabular form in 
     accordance with regulations to be promulgated by the 
     Commission, any agreements or understandings that such person 
     has with the named executive officers (as such term is 
     defined in the rules promulgated by the Commission) of such 
     issuer (or of the acquiring issuer, if such issuer is not the 
     acquiring issuer) concerning any type of compensation 
     (whether present, deferred, or contingent) that is based on 
     or otherwise relates to the acquisition, merger, 
     consolidation, sale, or other dispositions of all or 
     substantially all of the assets of the issuer, and the 
     aggregate total of all such compensation that may (and the 
     conditions upon which it may) be paid or become payable to or 
     on behalf of such named executive officer.
       ``(B) Shareholder approval.--Any proxy or consent or 
     authorization relating to the proxy or consent solicitation 
     material containing the disclosure required by subparagraph 
     (A) shall provide for a separate shareholder vote to approve 
     such agreements or understandings and compensation as 
     disclosed. A vote by the shareholders shall not be binding on 
     the corporation or the board of directors of the issuer or 
     the person making the solicitation and shall not be construed 
     as

[[Page 20416]]

     overruling a decision by such board, nor to create or imply 
     any additional fiduciary duty by such board.''
       ``(4) Rulemaking.--Not later than 1 year after the date of 
     the enactment of the Corporate and Financial Institution 
     Compensation Fairness Act of 2009, the Commission shall issue 
     rules and regulations to implement this subsection.''.
       (b) Study and Report.--The Securities and Exchange 
     Commission shall conduct a study and review of the results of 
     shareholder advisory votes on executive compensation held 
     pursuant to this section and the effects of such votes. Not 
     later than 5 years after the date of enactment of this Act, 
     the Securities and Exchange Commission shall submit a report 
     to the Congress on the results of the study and review 
     required by this subsection.

     SEC. 3. COMPENSATION COMMITTEE INDEPENDENCE.

       (a) Standards Relating to Compensation Committees.--The 
     Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by 
     inserting after section 10A the following new section:

     ``SEC. 10B. STANDARDS RELATING TO COMPENSATION COMMITTEES.

       ``(a) Commission Rules.--
       ``(1) In general.--Effective not later than 270 days after 
     the date of enactment of the Corporate and Financial 
     Institution Compensation Fairness Act of 2009, the Commission 
     shall, by rule, direct the national securities exchanges and 
     national securities associations to prohibit the listing of 
     any security of an issuer that is not in compliance with the 
     requirements of any portion of subsections (b) through (f).
       ``(2) Opportunity to cure defects.--The rules of the 
     Commission under paragraph (1) shall provide for appropriate 
     procedures for an issuer to have an opportunity to cure any 
     defects that would be the basis for a prohibition under 
     paragraph (1) before the imposition of such prohibition.
       ``(3) Exemption authority.--The Commission may exempt 
     certain categories of issuers from the requirements of 
     subsections (b) through (f), where appropriate in view of the 
     purpose of this section. In determining appropriate 
     exemptions, the Commission shall take into account, among 
     other considerations, the potential impact on smaller 
     reporting issuers.
       ``(4) No federal preemption.--If the law of the State under 
     which an issuer is incorporated provides for a procedure for 
     the board of directors to establish an independent 
     compensation committee, then such State law shall be 
     controlling and nothing in this section shall preempt such 
     State law.
       ``(b) Independence of Compensation Committees.--
       ``(1) In general.--Each member of the compensation 
     committee of the board of directors of the issuer shall be a 
     member of the board of directors of the issuer, and shall 
     otherwise be independent.
       ``(2) Criteria.--The Commission shall, by rule, establish 
     the criteria for determining whether a director is 
     independent for purposes of this subsection. Such rules shall 
     require that a member of a compensation committee of an 
     issuer may not, other than in his or her capacity as a member 
     of the compensation committee, the board of directors, or any 
     other board committee--
       ``(A) accept any consulting, advisory, or other 
     compensatory fee from the issuer; or
       ``(B) be an affiliated person of the issuer or any 
     subsidiary thereof.
       ``(3) Exemption authority.--The Commission may exempt from 
     the requirements of paragraph (2) a particular relationship 
     with respect to compensation committee members, where 
     appropriate in view of the purpose of this section.
       ``(4) Definition.--As used in this section, the term 
     `compensation committee' means--
       ``(A) a committee (or equivalent body) established by and 
     amongst the board of directors of an issuer for the purpose 
     of determining and approving the compensation arrangements 
     for the executive officers of the issuer; and
       ``(B) if no such committee exists with respect to an 
     issuer, the independent members of the entire board of 
     directors.
       ``(c) Independence Standards for Compensation Consultants 
     and Other Committee Advisors.--The charter of the 
     compensation committee of the board of directors of an issuer 
     shall set forth that any outside compensation consultant 
     formally engaged or retained by the compensation committee 
     shall meet standards for independence to be promulgated by 
     the Commission.
       ``(d) Compensation Committee Authority Relating to 
     Compensation Consultants.--
       ``(1) In general.--The compensation committee of each 
     issuer, in its capacity as a committee of the board of 
     directors, shall have the authority, in its sole discretion, 
     to retain and obtain the advice of a compensation consultant 
     meeting the standards for independence promulgated pursuant 
     to subsection (c), and the compensation committee shall be 
     directly responsible for the appointment, compensation, and 
     oversight of the work of such independent compensation 
     consultant. This provision shall not be construed to require 
     the compensation committee to implement or act consistently 
     with the advice or recommendations of the compensation 
     consultant, and shall not otherwise affect the compensation 
     committee's ability or obligation to exercise its own 
     judgment in fulfillment of its duties.
       ``(2) Disclosure.--In any proxy or consent solicitation 
     material for an annual meeting of the shareholders (or a 
     special meeting in lieu of the annual meeting) occurring on 
     or after the date that is 1 year after the date of enactment 
     of the Corporate and Financial Institution Compensation 
     Fairness Act of 2009, each issuer shall disclose in the proxy 
     or consent material, in accordance with regulations to be 
     promulgated by the Commission whether the compensation 
     committee of the issuer retained and obtained the advice of a 
     compensation consultant meeting the standards for 
     independence promulgated pursuant to subsection (c).
       ``(e) Authority To Engage Independent Counsel and Other 
     Advisors.--The compensation committee of each issuer, in its 
     capacity as a committee of the board of directors, shall have 
     the authority, in its sole discretion, to retain and obtain 
     the advice of independent counsel and other advisers meeting 
     the standards for independence promulgated pursuant to 
     subsection (c), and the compensation committee shall be 
     directly responsible for the appointment, compensation, and 
     oversight of the work of such independent counsel and other 
     advisers. This provision shall not be construed to require 
     the compensation committee to implement or act consistently 
     with the advice or recommendations of such independent 
     counsel and other advisers, and shall not otherwise affect 
     the compensation committee's ability or obligation to 
     exercise its own judgment in fulfillment of its duties.
       ``(f) Funding.--Each issuer shall provide for appropriate 
     funding, as determined by the compensation committee, in its 
     capacity as a committee of the board of directors, for 
     payment of compensation--
       ``(1) to any compensation consultant to the compensation 
     committee that meets the standards for independence 
     promulgated pursuant to subsection (c); and
       ``(2) to any independent counsel or other adviser to the 
     compensation committee.''.
       (b) Study and Review Required.--
       (1) In general.--The Securities Exchange Commission shall 
     conduct a study and review of the use of compensation 
     consultants meeting the standards for independence 
     promulgated pursuant to section 10B(c) of the Security 
     Exchange Act of 1934 (as added by subsection (a)), and the 
     effects of such use.
       (2) Report to congress.--Not later than 3 years after the 
     date of enactment of this Act, the Commission shall submit a 
     report to the Congress on the results of the study and review 
     required by this paragraph.

  The SPEAKER pro tempore. Pursuant to House Resolution 697, the 
gentleman from New Jersey (Mr. Garrett) and a Member opposed each will 
control 15 minutes.
  The Chair recognizes the gentleman from New Jersey.
  Mr. GARRETT of New Jersey. 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

[[Page 20417]]

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.
  Mr. FRANK of Massachusetts. Mr. Speaker, I yield 4 minutes to the 
gentleman from California (Mr. Sherman).
  Mr. SHERMAN. Mr. Speaker, I support the bill. I wish it went a bit 
further, and I, of course, oppose Mr. Garrett's amendment.
  First, his amendment significantly weakens the say-on-pay provisions. 
That's right. It weakens a provision, which, itself, simply provides 
for nonbinding resolutions; but the core of the Garrett amendment is 
that it eliminates the provision in the bill which is designed to 
provide very modest restrictions on some very peculiar and pernicious 
compensation formulas that have been used on Wall Street. Now let us 
look at how narrow this provision is.
  It applies only to financial institutions and then only to those with 
over $1 billion. It does not prohibit $1 million-dollar-a-month 
salaries. It does not prohibit $10 million-dollar-a-month salaries. It 
allows an executive to get a kajillion stock options and another 
kajillion shares of restricted stock. This bill is not an overall limit 
on compensation on Wall Street.
  What it does is it prohibits those compensation formulas that provide 
an incentive for taking extreme risks, risks that are bad for our 
economy, risks that are bad for the company.
  Now, the Group of 30, led by Paul Volcker, found and reported that 
there are numerous examples of misaligned incentives, of incentives 
that contribute to instability and to cyclicality in financial markets. 
The crisis has driven home the importance of aligning compensation 
practices with the incentives and controls in a firm's risk-management 
program, aligning pay with long-term shareholder interests rather than 
with short-term returns that cannot be sustained and which entail 
greater risk.

                              {time}  1115

  So this is a provision not designed, not intended to limit the 
overall financial compensation in financial institutions, not designed 
to prevent enormous bonuses. But the bonuses must not, by themselves, 
be designed to undermine the economy or the company.
  Now, this is a small step that we can take to make sure we don't have 
another financial meltdown.
  Let me respond to Mr. Hensarling and others who came to this floor 
and basically said all we have to do is make sure there are no further 
bailouts. Well, I opposed the Wall Street bailout, but I'm not going to 
join with those who say the only problem we had in September of 2008 is 
that we voted for the bill.
  We've got to act to prevent the next financial meltdown, and it is 
not enough to come to this floor and say, Well, it's okay to have 
another September 2008 as long as we vote against some future bailout 
bill twice instead of once.
  The goal is not to defeat the TARP bill. The goal is to prevent the 
conditions which caused so many to think that it was necessary and for 
all of us to recognize that we faced a great financial crisis.
  The way to do that is to vote down this amendment and make sure that 
some very peculiar, very pernicious incentive formulas are not used to 
cause those on Wall Street to feel that if they could only take the 
most enormous risk, they can maximize their compensation.
  Mr. GARRETT of New Jersey. I yield 3 minutes to the gentleman from 
Texas (Mr. Neugebauer).
  Mr. NEUGEBAUER. Mr. Speaker, I rise in support of the Garrett 
substitute. This is a reasonable and thoughtful substitute. Republicans 
on the Financial Services Committee are here to bring good ideas to the 
table to try to work with the majority to ensure that our markets 
operate with transparency and integrity.
  Our substitute includes a non-binding shareholder vote on executive 
legislation. Rather than vote every year, though, our substitute aligns 
the vote with standard time frames of compensation packages and ensures 
that institutional investors who represent the shareholders in casting 
their votes will be able to have proper time to do the due diligence 
necessary to make meaningful votes.
  The substitute allows shareholders who don't want to be involved in 
these votes to opt out. Makes sense to me. If I don't want to 
particularly be involved in that, give me the opportunity.
  Finally, the substitute ensures that the Federal Government cannot 
decide to pay for employees or financial institutions. Determining pay 
practices is not the role of government. As we work together to reform 
the financial regulatory structure, debating compensation practices may 
make some feel better, but it doesn't fix the cause of our financial 
crises. While we and the public may not like to hear about some of the 
large salaries and bonuses others have earned, we have to ask ourselves 
how much did these compensation practices really contribute to the 
problem.
  The most important tool available to regulators is the ability to set 
capital standards for financial institutions, not the ability to tell 
financial institutions how they can pay or how much they should pay 
their employees. We

[[Page 20418]]

need regulators to ensure capital and leverage ratios at financial 
institutions match the risk that those entities are taking on. That's 
what regulators should focus on, not deciding whether or not a certain 
incentive practice is appropriate or not.
  Ohio State University finance professor Rene Stulz recently released 
a finished study comparing bank performance last year and CEO 
incentives leading up to the crisis. Professor Stulz is quoted in 
today's New York Times: ``It's hard to believe that regulators will be 
better at devising compensation plans with proper incentives,'' he 
says. ``Properly designed capital requirements are a much more 
efficient approach to regulate the risk of financial institutions than 
fiddling with compensation.''
  When we allow Federal regulators to decide how much employees of 
financial institutions get paid, the government is overreaching. 
Congress should be working to encourage well-managed, well-run, and 
well-capitalized financial institutions. This bill does the opposite.
  Support the commonsense Garrett substitute.
  Mr. FRANK of Massachusetts. 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. GARRETT of New Jersey. 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.)
  Mr. HENSARLING. 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.
  Mr. FRANK of Massachusetts. 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. SCOTT of Georgia. Let me say this: Mr. Garrett's amendment is 
sort of like not having a say-on-pay but maybe just a little whisper. 
Mr. Garrett's amendment goes at the heart and the soul of this bill and 
that is

[[Page 20419]]

this: that we must have a very strong, definitive say-so from the 
shareholders.
  Now, Mr. Hensarling, the gentleman from Texas, pointed out about the 
bailouts and how we're to prevent this. This measure that we have is 
designed to prevent this same situation from happening again. In 
section 4, as he pointed out, the reason we need section 4--and let us 
remember what section 4 is: section 4, again, is the heart and soul of 
this because it spells out how we're going to go about preventing 
bonuses tied to incentives that have dragged down this economy and 
brought us into the financial situation we have.
  He questions the regulators. Maybe the American people might need to 
know who we're talking about. We're not talking about somebody over 
here inexperienced we're just going to set up. Who are these 
regulators? These regulators are the Federal Reserve Bank whose duty it 
is to regulate our economy. It is the Office of the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation that has to go in 
afterwards and fix banks and declare bankruptcy of banks. The Office of 
Thrift Supervision, the National Credit Union Administration Board and 
the Security and Exchange Commission and the Federal housing agencies.
  What is this awesome power we're giving to them? It's spelled out 
very simply. What we want them to do is simply we will require these 
regulators to prohibit certain compensation structures at large 
financial institutions if they could have a serious adverse effect on 
financial instability. That's what we are trying to do. We're trying to 
prevent the same thing from happening again.
  And then, secondly, we will require Federal regulations to write 
rules requiring Federal institutions to simply disclose their 
incentive-based pay plans, incentives that are tied to risk behavior.

                              {time}  1130

  Mr. Speaker, what has happened that brought this on here is a simple 
case, AIG. They went and they set up a little department with 430 
employees out of Connecticut and over into Europe and assigned them 
risky behavior and signed their rewards to that risky behavior for 
their bonuses. The company came down. We had to bail them out. And you 
know who had to pay for those bonuses? The taxpayers. This bill is 
designed to prevent that. This amendment is designed to gut it.
  Vote down the amendment.
  Mr. GARRETT of New Jersey. I yield 2\1/2\ minutes to the ranking 
member, the gentleman from Alabama (Mr. Bachus).
  Mr. BACHUS. 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. FRANK of Massachusetts. 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).
  Mr. CARSON of Indiana. Mr. Speaker, today I've heard a number of 
interesting accusations about what this legislation would do if passed. 
I have heard that the government will sit in board rooms and set caps 
on pay. But of course my constituents are accustomed to hearing these 
kinds of false arguments from those who wish to maintain the status 
quo.
  My constituents sent me to Congress to move beyond the status quo of 
a broken financial regulatory structure. They sent me to enact 
commonsense reforms like those included in the legislation we're 
discussing today, Mr. Speaker. They know that average families have cut 
back, work longer hours, and have saved their money during this crisis. 
Meanwhile, Wall Street execs have acted irresponsibly and enjoy the 
lavish compensation packages that have allowed their companies to fail.
  So I am proud to be an original cosponsor of this bill that will 
bring about a new era of responsibility on Wall Street. I encourage my 
colleagues to do the same.
  Mr. GARRETT of New Jersey. Mr. Speaker, may I inquire as to how much 
time is remaining and who will be closing?
  The SPEAKER pro tempore. The gentleman from Massachusetts has the 
right to close.
  The gentleman from New Jersey has 3 minutes remaining, and the 
gentleman from Massachusetts has 3\1/4\ minutes remaining.


                         Parliamentary Inquiry

  Mr. GARRETT of New Jersey. Parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state his inquiry.
  Mr. GARRETT of New Jersey. As far as the procedure for determining 
who closes, is it not the author of the amendment?
  The SPEAKER pro tempore. A manager controlling time in opposition has 
the right to close the debate.
  Mr. FRANK of Massachusetts. Parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state his parliamentary 
inquiry.
  Mr. FRANK of Massachusetts. 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?
  Mr. GARRETT of New Jersey. I yield myself the remaining 3 minutes.

[[Page 20420]]

  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.
  Mr. FRANK of Massachusetts. I yield our remaining time to a leading 
member of the committee, the gentleman from Colorado (Mr. Perlmutter).
  Mr. PERLMUTTER. Mr. Speaker, I appreciate the comments of my friend 
from New Jersey, but I would say the word that comes to mind is 
``amnesia.'' My friends on the Republican side of the aisle have 
amnesia. They have amnesia over how the Bush administration tried to 
deregulate everything, tried to make government smaller and more 
ineffective so that we could have Ponzi schemes as existed under 
Madoff. That occurred under the George Bush administration. We had the 
failure with Katrina, and we had the biggest collapse in the banking 
sector ever because of deregulation and a belief that the free market 
could do anything it wanted to do.
  Now, this bill is very mild. What it allows, Mr. Speaker, is it 
allows shareholders to have a say on what the officers of the company 
make in terms of salary, the owners having a say on pay. What could be 
more American and more free enterprise than that?
  What it does allow is the board of directors to overrule the 
shareholders if they think that's appropriate. But we need to have the 
ownership of the company have a say on what their executives make so 
that it doesn't get out of line and that there is no back-scratching 
going on.
  The second piece that my friends complain about and that the 
substitute is designed to gut is that the Federal banking regulators 
have a say on the commissions and the bonuses and the stock options 
that exist. And where we saw this most specifically was in mortgages. 
Lots of mortgages sold, lots of commissions made, lots of stock options 
went straight through the roof, but there was a time bomb in those 
mortgages 4 or 5 years down the road that caused all those mortgages to 
fail and companies and banks to collapse.
  We're not going to allow that anymore. We're not going to allow the 
taxpayer to be holding the bag the way we've had to hold the bag this 
last fall. It is a time for reasonable regulation to restore confidence 
in our financial system. That's what this bill does. The substitute 
amendment guts that.
  I urge a ``no'' vote on the substitute and a ``yes'' vote on say-on-
pay.


                         Parliamentary Inquiry

  Mr. GARRETT of New Jersey. Parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state his inquiry.
  Mr. GARRETT of New Jersey. Can the Chair indicate how much time is 
remaining?
  The SPEAKER pro tempore. All time for debate on the amendment has 
expired.
  Does a Member seek unanimous consent to extend the debate?
  Mr. GARRETT of New Jersey. Yes.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New Jersey?
  Mr. FRANK of Massachusetts. 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.
  The SPEAKER pro tempore. Without objection, debate will be extended 
by 5 minutes on each side of the aisle.
  Mr. FRANK of Massachusetts. Mr. Speaker, I reserve my time. I have, 
at most, one further speaker.
  Mr. GARRETT of New Jersey. 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.

[[Page 20421]]

  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.

                              {time}  1145

  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.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Mr. FRANK of Massachusetts. 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.

[[Page 20422]]

  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----
  Mr. LEWIS of California. Will the gentleman yield?
  Mr. FRANK of Massachusetts. I yield to the gentleman from California.
  Mr. LEWIS of California. I wish the gentleman would start over. I'm 
finding it difficult to understand your very rapid speech. Will you 
slow down a little bit?
  Mr. FRANK of Massachusetts. 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.
  The SPEAKER pro tempore. All time has expired.
  Pursuant to House Resolution 697, the previous question is ordered on 
the bill, as amended, and on the amendment in the nature of a 
substitute printed in House Report 111-237 offered by the gentleman 
from New Jersey (Mr. Garrett).
  The question is on the amendment offered by the gentleman from New 
Jersey (Mr. Garrett).
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             Recorded Vote

  Mr. GARRETT of New Jersey. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to House Resolution 697, further 
proceedings on this question will be postponed.
  Pursuant to clause 1(c) of rule XIX, further proceedings on the bill 
will be postponed.

                          ____________________