Corporate and Financial Institution Compensation Fairness Act of 2009

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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.

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.

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