WASHINGTON — The Senate approved a roughly $838 billion economic stimulus package Tuesday that includes a handful of tax and housing provisions the banking industry supports, along with executive compensation restrictions it strongly opposes.
The Senate bill, approved by a vote of 61 to 37, includes provisions to limit executive compensation at banking companies receiving Troubled Asset Relief Program funds. The banking industry hopes to scale back those provisions when the House and Senate hash out differences between their stimulus bills.
The House version, which passed Jan. 28 by a vote of 244 to 188, did not include compensation restrictions.
The Senate version would require institutions that used "federal bailout" funds to pay employees bonuses of over $100,000 to either repay the cash portion within 120 days of the provision's enactment or face an excise tax of 35% on what is not immediately repaid to the Treasury Department.
It would require the Treasury secretary to review and "claw back" any bonus or compensation paid to an executive whose company received Tarp dollars but was later found to have filed false earnings reports or anything materially inaccurate or misrepresentative of the company's financial status. It would also ban bonuses or incentive compensation for the 25 highest-paid employees, and it would give the Treasury secretary the power to extend that ban to more employees.
The bill would cap total executive compensation for employees of Tarp recipients at $400,000 a year.
Another measure in the Senate bill is meant to reduce foreclosures. It would require the Treasury to spend at least $50 billion of Tarp funds to design and implement a loan modification program within 15 days of enactment to help at least 2 million borrowers avoid foreclosure. It would also seek to increase use of the Hope for Homeowners program, which lets lenders reduce a borrower's mortgage principal in exchange for government insurance.
The stimulus bill contains some tax measures that the banking industry supports. To spur the housing market, the Senate version would enhance and liberalize a homebuyer tax credit by doubling the credit, to $15,000, and allowing it for any homebuyer.
The bill also would expand the net operating loss carryback period from two years to five for 2008 and 2009, but it would preclude Tarp recipients from using the expansion.
The Senate bill would give $730 million to Small Business Administration loan programs, including $630 million for reducing the 7(a) and 504 loan program fees.