On Thursday, the House Financial Services Committee passed the Grayson-Himes Pay for Performance Act of 2009 by a vote of 38-22. The bill requires bonuses for employees of TARP recipients to be tied to performance. Commenting on the bill’s passage, Representative Alan Grayson (D-FL), a sponsor of the bill, stated that “no one should get rich off taxpayer money … and no one should get rich off abject failure.” Grayson continued, claiming that a failure to limit executive compensation in such companies would amount to a failure “to protect the taxpayers.”

While, in the wake of the AIG bonuses of mid-March, Congress had moved toward a 90% tax on bonuses by TARP recipients, the Grayson-Himes bill is comparatively moderate, limiting only “unreasonable and excessive” compensation. This standard will be developed and enforced by Treasury.

Treasury would be required to consult with the Congressional Oversight Panel and obtain various agency approvals before defining “unreasonable or excessive” compensation and establishing performance-based measures.

The bill would also effectively repeal a provision that currently exempts bonuses to highly compensated employees that are due under employment contracts entered on or before February 11, 2009, which is the much publicized “AIG bonus loophole.”

Finally, the bill would require TARP participants to submit an annual report to Treasury stating how many employees received or will receive total compensation above specified dollar amounts during the fiscal year.

House Speaker Nancy Pelosi (D-CA) indicated that the bill will reach the floor of the House shortly. Senate Majority Leader Harry Reid (D-NV) stated that legislation on bonuses would not reach the Senate floor until late-April, after Congress’ spring recess.