WASHINGTON – The House voted Friday to slap restrictions on how Wall Street executives are paid after nine banks that took government bailout money rewarded thousands of their employees with bonuses topping $1 million each.
Bowing to populist anger and defying President Barack Obama’s suggestion that government rely on incentives instead of intervention to curb excessive salaries and bonuses, the House passed the bill on a 237-185 vote.
But the bill goes farther than Obama wanted by prohibiting pay incentives that encourage employees to take financial risks that could threaten the economy or viability of the institution.
Obama said giving shareholders a “say on pay” and diminishing management influence on pay packages would go far in curbing the lavish pay seen at some banks.
Rep. Barney Frank, D-Mass., who sponsored the bill, said the extra regulation is necessary to ensure bankers and traders aren’t rewarded only if they take big risks. Under the provision banning risky incentive-based pay, regulators would be given nine months to dictate precise guidelines.
If a bet goes wrong, “the company loses money and the economy may suffer, but the decision makers do not,” he said.
The vote came one day after New York Attorney General Andrew Cuomo reported that the nation’s biggest banks awarded nearly 4,800 $1 million-dollar-plus bonuses in 2008 even as their profits dwindled and they accepted billions in government aid.
