The United States House of Representatives acted twice last week to increase federal oversight over funds distributed under the Troubled Asset Relief Program ("TARP"). On Thursday, the House Financial Services Committee approved the Grayson-Himes Pay for Performance Act of 2009 (H.R. 1664). This bill is intended to curtail "unreasonable and excessive" compensation and non performance-based bonus and retention payments made to executives and employees of companies that receive or have received TARP funds and funds under the Housing and Economic Recovery Act of 2008. The measure would amend Section 111 of the Emergency Economic Stabilization Act of 2008 ("EESA"), 12 U.S.C. § 5221, to prohibit such payments whether they are made pursuant to "existing" or "new" compensation arrangements. The legislation is also intended to repeal prior provisions that currently exempt bonuses due under employment contracts entered into on or before February 11, 2009. Under the bill, the Secretary of the Treasury, in consultation with the Chairperson of the Congressional Oversight Panel and with the approval of the agencies that make up the Federal Financial Institutions Examination Counsel, must define "unreasonable and excessive" compensation. The Treasury Secretary must also indentify performance-based standards that a TARP fund recipient must apply when determining whether to make a bonus or retention payment. The bill is being forwarded for consideration by the full House, and could come up for a vote as early as this week.
On Wednesday, the House unanimously approved a bill, passed by the Senate in February, that details the duties of the Special Inspector General ("SIG") for the TARP. Neil M. Barofsky, the former head of the mortgage fraud unit of the United States Attorney's Office in Manhattan, was appointed as the SIG for TARP by President Bush in 2008, and currently retains the position. If signed by President Obama, the measure would amend Section 121 of EESA to specify that the SIG for TARP has the authority to "conduct, supervise, and coordinate an audit or investigation of any action" taken with respect to TARP funds, as the SIG for TARP deems appropriate. Mr. Barofsky stated that the bill "clarifies our authority to provide oversight for every TARP dollar, no matter where it is spent, how it is spent, or under what program it is spent." The SIG for TARP is required under the bill to provide Congress with quarterly reports summarizing the SIG for TARP's activities. The Secretary of the Treasury is responsible for taking action on the deficiencies identified by the reports, or to certify to the appropriate committees of Congress why no action is necessary or appropriate.