WASHINGTON — The Senate approved a roughly $838 billion economic stimulus Tuesday 61 to 37 that includes a handful of tax and housing related provisions that the banking industry supports, but also includes executive compensation restrictions which it strongly opposes.
The Senate bill includes three amendments to limit executive compensation at banks receiving Troubled Asset Relief Program funds which the banking industry hopes to scale back when the House and Senate hash out differences between the stimulus bills.
The House bill did not include compensation restrictions in its version which passed Jan. 28 with a vote of 244 to 188.
The Senate bill would require institutions that used "federal bailout" funds to pay employees bonuses in excess of $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 empower him to "claw back" any bonus or compensation paid to an executive whose company received Tarp dollars, based on false earnings reports or any other basis later found to be materially inaccurate or misrepresentative of that company's financial status. It would also ban bonuses or any incentive compensation for the 25 most highly-paid employees; and would give the Treasury Secretary power to extend that to more employees.
The bill would also cap total executive compensation for employees at Tarp recipient companies at $400,000 per year.
The Senate bill also includes a measure to reduce foreclosures by requiring the Treasury Department to spend at least $50 billion in Tarp funds to design and implement a loan modification program within 15 days of enactment to help at least two million borrowers prevent foreclosure.
It would also seek to improve use of the Hope for Homeowners program, which lets lenders reduce a borrower's mortgage principal in exchange for insurance through the Federal Housing Administration.
The stimulus bill also contains some tax measures that the banking industry supports. To spur the housing market, the Senate bill would greatly enhance and liberalize a homebuyer tax credit by doubling the credit to $15,000 over two years; allowing it for any homebuyer — not just first-time homebuyers; and removing income-level restrictions. It would also make the tax break permanent by eliminating a requirement that homebuyers pay the tax credit back.
The bill also expands the net operating loss carry back period from two years to five years for 2008 and 2009, but it would preclude Tarp recipients from utilizing the expansion.
The Senate bill would give $730 million for Small Business Administration loan programs including $630 million for reducing the 7(a) and 504 loan program fees.
President Obama has asked the House and Senate to have the stimulus bill on his desk before Congress adjourns for President's Day recess next week, but lawmakers might need to work through the weekend to meet that deadline.