The House Financial Services Committee will hold a hearing Friday on the compensation practices at big banks.
The hearing comes as the Obama administration announced plans to levy a tax on large financial institutions to help repay the government for aid it provided to American International Group and large banks during the economic crisis that began in September 2008.
At the same time, Sen. Charles Grassley, R-Iowa, ranking minority member of the Senate Finance Committee, asked Kenneth R. Feinberg, the special Master for Compensation for the Troubled Asset Relief Program, to determine why an AIG executive who resigned is entitled to a multi-million dollar severance agreement.
"The taxpayers are fed up with massive payouts to executives at companies that took taxpayer money," Grassley said. "The special master for compensation should account for a multi-million dollar severance agreement for this AIG executive," he added.
The executive is Anastasia Kelly, executive vice president, general counsel, and senior regulatory and compliance officer, who resigned at the end of the year to protest the pay limits Feinberg imposed on AIG executives in November.
Kelly will receive between $2.8 million and $3.8 million in severance following her Dec. 30 departure, according to reports.
Generally, severance agreements are intended for involuntary separations, Grassley noted in his letter to Feinberg.
However, in this instance, it appears Kelly was not terminated, Grassley said.
"On the contrary, she reportedly decided to leave the company because she was unwilling to accept the limit on executive salaries you imposed," he said. "For me, and I am sure for taxpayers across America, the situation as reported surrounding Ms. Kelly and her severance is deeply troubling news. This is especially true in light of the already sordid record at AIG of paying massive executive bonuses with TARP taxpayer money."
Rep. Barney Frank, D-Mass., financial services committee chairman . said the hearing is aimed at persuading officials of the Senate Banking Committee to include provisions in their version of financial services reform legislation similar to those in the House bill passed in December.
Those provisions would allow shareholders of all public companies to have a vote on executive compensation packages and give securities and banking the authority to restrict risk-based incentive pay.
The Senate banking panel has broken up into 2-person groups to draft omnibus legislation reforming regulation of the financial services industry. It is unclear when work on the Senate draft will be completed and unveiled as a comprehensive piece of legislation.
"I think compensation has gotten excessive," Frank said. "We may not be able to deal with it; there are limits to what you can do publicly. But I want to explore what we can do further; I want to underline what we are already doing, frankly, in the hope that maybe the Senate will be even more inclined to do this."
He said he wants to consider "the broader implications," specifically "about ways to deal with excessive compensation that are legitimate for the government's role. We will also then deal with the arguments against that. And the arguments against that is, well, it's going to be bad for society, bad for the economy if you do those. I think it's time to have those arguments aired, and that is what we will do."
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