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Washington, D.C. - Congressman Brad Sherman today introduced legislation to impose a 70% surtax on all excess compensation over $1,000,000 per year paid to executives of all the big bailed-out firms.
Sherman’s legislation applies to all financial institutions which receive over $500 million under the TARP program. It also covers Fannie Mae and Freddie Mac, which were bailed out under a program adopted last summer.
“My bill deals with all compensation, whether it is called a salary, bonus, retention payment, commission, employee of the week prize, or whatever,” Sherman said. “Some will argue that a $1,000,000 per annum cap on executive compensation is too low. For this reason, I allow the Treasury to permit bailed-out firms to give executives restricted stock.”
Restricted stock cannot be sold unless and until all the bailout money has been returned to the Treasury. If the company goes bankrupt before fully repaying the Treasury, then such restricted stock will be permanently worthless.
The bill makes it plain that no executive will be taxed in any way on any compensation returned to the employer. Sherman’s legislation also exempts commissions for non-executive salespersons.
Sherman noted the differences between his bill and H.R. 1586 which passed the House of Representatives on Thursday, March 19th. The bill previously passed does not affect the ability of bailed-out financial institutions to paymillion-dollar-a-month salaries to executives. A bailed-out bank which might otherwise pay an outrageous bonus is still free to raise an executive’s salary to $2 million a month. That legislation only covers bonus payments made since January 1, 2009, and would not reach the millions in huge bonus payments made by Merrill Lynch and other banks in 2008.
Original cosponsors include Representatives Marcy Kaptur, Bob Filner, Dennis Kucinich, and Peter DeFazio.
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