Less strict legislation on bonuses approved by the House

On Wednesday the bill that imposes restrictions on bonus payments at banks that receive governmental bailout funds passed on a 247-171 vote in the U.S. House of Representatives. Under the new legislation the U.S. Treasury will have much power to ban "unreasonable and excessive" compensation and bonuses that are not based on performance standards.

The new "Pay for Performance Act of 2009" is applicable to all employees, not just executives, of companies which were invested from the Treasury's $700 billion financial rescue fund. The legislation also regulates compensation paid to an employee after leaving a firm or before joining it.

The "Pay for Performance Act of 2009" is another initiative undertaken by the government in the wake of public indignation at high bonuses paid recently at insurer American International Group, which has received a bailout worth up to $180 billion.

"The Pay for Performance Act is based on two simple concepts. One, no one has the right to get rich off taxpayer money, and two, no one should get rich off abject failure," said one of the bill's authors, Representative Alan Grayson, a Florida Democrat who co-authored the measure. "We should not pay an arsonist to put out his own fire, and we should not be paying an executive to ruin his own bank."

Previously the House passed a bill that imposes a 90% tax on bonuses for certain executives at companies receiving government aid. The act approved on Wednesday is expected to sideline that bill which seems to enjoy little popularity in Senate. The "Pay for Performance Act of 2009" featuring less aggressive approach will authorize the Treasury to decide what is unreasonable or excessive, and what constitutes performance-based pay.

Under the regulation of the new act companies that paid back governmental bailout funds are no longer subject to the bonus restrictions stipulated by the law. Besides, those community banks that receive less than $250 million in government funds are also excluded from the act.