Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Chairman, I would say by explanation I have consulted and I appreciate the cooperation of the members of the minority. The minority is not opposed to this bill. I am not opposed to the next amendment that's going to be offered. So we've agreed to take 5 minutes each, and I think we then have worked everything out so that on the next one, we will get an equality of time and there will be real opposition. And I appreciate the accommodation that the members showed in reaching this. I understand the principle because it's one we have in the bill, but the question is on which end do you wait? The gentlewoman has suggested that people would want to pay it and they can't get it all paid at once, and that's true, and therefore, they should immediately be removed from the restrictions. But the alternative is this: They announced they are going to pay it, they plan to make the compensation adjustments, and they pay them--they simply defer them for a couple of months. In other words, it seems to me there are two possible arguments. One is that the repayment period would be a very long period, in which case I wouldn't want there to be a tolling of the provision. The other is that the repayment period will be a fairly short period, in which case it's only a short period to have to wait until they pay the bonuses. So I think that is a better way to deal with it. It is not an unreasonable position. The question is where do you do the risk. This way they say we're going to repay, they do a repayment schedule, and as soon as they repay, they can make those payments. In other words, the entity that determines how long it will be is the repaying entity. I think the good legal principle is it's the entity that controls the timing that bears the burden of a delay. If they delay too much, then they have a problem. If they do it promptly, then they don't have a problem because they can make the payments. And I do think with all the other burdens that you put on the secretary--and then I guess the other question is well what if people say they are going to repay, and for some reason they aren't able to make the scheduled payments. Do they have to rescind the bonuses? Do we get into that again? So I would prefer to leave it as we have now. People can announce they're going to repay and the more quickly they repay, the more quickly they can make those payments, and there is nothing that stops them from telling people, By the way, we plan to repay, and as soon as we do, you'll get this raise, you'll get this bonus. I think that is a better way to go. I reserve the balance of my time.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield my remaining time to the gentleman from California, Mr. Sherman.

Mr. FRANK of Massachusetts. I appreciate that, and I would emphasize the point made by the gentleman from California, which is, as drafted, the amendment would say that people who have had billions of dollars in TARP money are not covered by this amendment. Billions of dollars. The question of the average worker is a bit of a straw employee. No one is talking about getting to that level, and that has not been the problem, but if you talk only about the top executives, AIG gave bonuses to hundreds of people. I don't believe anyone thinks secretaries are getting excessive and unreasonable amounts of money or huge bonuses. Again, if you vote for this amendment, you are removing the debate about the part of the recovery bill that says no retroactivity.

Mr. FRANK of Massachusetts. Mr. Chairman, I rise to claim the time in opposition.

Mr. FRANK of Massachusetts. I reclaim my time. The answer is obvious. No, the stimulus bill did not come to a committee which had no jurisdiction over it, as the Member well knew. I am talking about the accusation that a bill to correct a mistake is a coverup. The illogic of that is overwhelming. The lack, I think, of commitment here to public policy is striking. The gentleman is complaining about a mistake, and he calls an attempt to correct a mistake a coverup. What is the coverup? This is a bill that was debated openly in a markup, it was debated openly in the Rules Committee. It is being debated openly on the floor. This accusation of coverup is not, it seems to me, a serious contribution to a debate on the merits. But there is also the fundamental inconsistency on the Republican side. They were opposed, and the gentleman said this bill is going to get us deeper into the affairs of corporations. How? By repealing something the gentleman was opposed to. If in fact the provision he didn't like hadn't been put in there in the first place, we wouldn't have been so deeply into it. This is simply, let's find something to complain about. Let's ignore logic. The gentleman says he doesn't want us more deeply into corporations. Well, then he should have been for that restriction. Indeed, his quarrel with Senator Dodd is not that he only got part of what he wanted, but that he moved it at all. Because, remember, it was Senator Dodd who initiated the further restriction. I reserve the balance of my time.

Mr. FRANK of Massachusetts. I thank the gentleman from Alabama for a sense of fairness that I wish had been more present in the House. We are here, talking about retroactivity. Again, this raises the central issue. People on the Republican side have been objecting to a provision added in the recovery bill that says ``no retroactivity.'' This does that again, so I don't understand. If people are genuinely opposed to the amendment added to the recovery bill, they cannot consistently be supportive of this amendment. The principle is the same. Is the principle of no retroactivity a terrible abuse of the taxpayer or is it a matter of fairness? It cannot be both. So Members who vote for this amendment are voting to ratify what was done in the recovery bill. If it passes, then people will not be able to argue that the recovery bill, without giving Members a chance to vote, took away an important part of the restriction, because that is the question. It is more than retroactivity in that sense. Although, the gentleman did want to modify the amendment, and I didn't think, at this late date, that that was appropriate. It even would allow some restriction on what you could do going forward depending on when people took the TARP money. It says this would only apply as written--and I know the gentleman wanted to modify it. If you now have TARP money and do not refuse it, you are not covered by this. The amendment says, if you now have TARP money and decide to keep it, you are not covered by this. It is far too broad. It is broader even than the retroactivity. It says only those companies that now decide to take an infusion under TARP will be restricted. I know the gentleman wanted to change it at the last minute. I didn't think that was appropriate at the last minute. The other part of it is this: The gentleman says he wants to protect anything already done. He wants to ban retroactivity. That is precisely what has gotten everybody excited about what the Senate put into the recovery bill.

Mr. FRANK of Massachusetts. Yes.

Mr. FRANK of Massachusetts. Regular order.

Mr. FRANK of Massachusetts. Will the gentlewoman yield to me?

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I reserve the balance of my time.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, there is a great deal of anger in the Nation, and it is reflected in this House, which is representative of the Nation, about retention bonuses given to people who worked at AIG. Retention bonuses in this situation, Mr. Speaker, strike me as a form of legalized extortion. These are not performance bonuses. I was unclear about that and misspoke about it to some extent. These are bonuses paid solely so that people who had been employed at AIG would not leave AIG as it became clear the company was in trouble. Specifically, we were told that these retention bonuses go to employees who were engaged in complex financial transactions. Now it is, in sum, these complex financial transactions that caused the company the problem. The insurance entities, regulated by State insurance regulators, caused no problem. In fact, they generated the resources and the revenues that allowed these other people to get themselves in trouble. According to Mr. Liddy, who was appointed to head AIG after the failure, a decision was initiated by the Federal Reserve last September to lend them money and then make a change in the company's management. Mr. Liddy said he was afraid--and he is genuinely sincere about this-- he was afraid that some of these people who had been working at the company and who had intimate knowledge of these complex transactions would leave the company and might, in fact, even use their knowledge in ways that would be adverse to the company. That is a very sad commentary on them. These are people who were engaged in these transactions, the effect of which was to put the company in trouble. And we are told that they have to be bribed not to abandon the company in their time of trouble. Now, I am skeptical that the best way to get out of the hole that those people dug was to let them get extra pay for wielding the shovel. I believe there could have been other people hired. My colleague, Mr. Capuano, did some good questioning in this. We were told AIG felt, no, they had to pay the bonus. I think that is a very grave error. My own preference is, and I have urged this on the administration, my preference is that they bring a lawsuit on behalf of the U.S. as the major shareholder so that we can recover here; that is, it is not a case of us as a regulator intruding on a contract by others. This is a case where we are the major owners of this company. And I believe that it is a grave error to enrich people who have apparently threatened to leave the company, abandon it and not help them get out of the problems they created unless they are given these bribes called ``retention bonuses.'' We have a resolution here which talks about several things. First, it does express our determination to prevent these from happening in the future. We have already done some of that. We should note, this provision here, this decision was made unilaterally by the Federal Reserve system under a 1932 statute. There was no congressional input whatsoever into the decision last September to do this. The Secretary of the Treasury, Mr. Paulson, accompanied me, the chairman of the Federal Reserve, Mr. Bernanke, and they came to Congress, and they said that Mr. Bernanke had decided to give a loan of $85 billion to this company. No restrictions were put on the company. Two days later, the same two gentlemen asked us to enact legislation providing for $700 billion in authority. At that point, we said, among other things, there has to be some restrictions on the compensation paid. Now we didn't get all the restrictions we wanted because we were in the negotiation process. But it was instructive that when the Fed did it on its own with the Secretary of the Treasury's support, there were no restrictions on compensation. Two days later, we immediately raised that, had a debate and got some of them. Now, we have gone further. I would make this contrast. We have AIG without any restrictions. Under the TARP program, which Congress voted and which is now being administered by the current administration, we have not only imposed restrictions, we are now being criticized in the press and by some of the recipients for being too tough on them. In the New York Times last week, there was a front page article that said the banks are going to have to give the money back because we are too tough on compensation, lavish entertaining and too much pressure to make loans. There was an article in the Washington Post business section 3 days ago making the same point. I welcome that kind of criticism. I welcome the recognition that we have now become very tough. The problem is that these bonuses were granted under an authority that the Federal Reserve gave before Congress got into the situation and were able to put on the restrictions. This resolution is a beginning of what we will be doing. There is also, I hope, going to be a lawsuit. I have been pressing the administration for a shareholders' lawsuit to recover the bonuses that have already been paid. And there will be other legislative vehicles. I hope that the Committee on Financial Services will mark up a bill next week which will embody much of what is in this resolution. We will have a markup in committee. I hope we will be able to bring a bill to the floor that will deal with this both prospectively and retroactively. At this point, this is a statement of intention which I think is appropriate because people in this country want to know what we are doing. It will be followed up by a markup in committee. We have had several hearings on the subject of compensation and a big one on AIG, obviously, yesterday. And we will have another AIG hearing next week with the Secretary of the Treasury and the Chairman of the Federal Reserve. But we will be marking up legislation next week in committee and voting on it the final week before the recess so that what we state here as our intention I hope will become law. I reserve the balance of my time.

Mr. FRANK of Massachusetts. I will confess, Mr. Speaker, I was not paying as close attention to the gentleman from New Jersey.

Mr. FRANK of Massachusetts. Would he rephrase the question?

Mr. FRANK of Massachusetts. Mr. Speaker, we have passed from creationism to fantasy. It's interesting. The gentleman from Texas (Mr. Gohmert) was very critical, in fact, of the actions of the Republican leader. He said we begged people not to vote for the TARP. The Republican leader in the House last fall worked very hard to get it passed. So did the other members of his leadership. So did the other Members of his leadership, and now he is being denounced for that. So I guess he broke even on his side, which these days, if you are in the minority, may be a pretty good day. But the fact is this, the gentleman from New Jersey says, well, the Democrats were in the majority--though he said Democrat majority. Pardon me, for not getting his inflection absolute. Yes, the President of the United States, George Bush, came and asked us to do this, and his two top economic advisers said if you don't do it, there will be a crisis. But, in fact, that's not directly relevant to the AIG issue. AIG was granted money. And, by the way, the gentleman from New Jersey again misstates the relevant statute. The statute that we are referring to, that the gentleman from Texas referred to, is not the original one creating the Federal Reserve, it's the 1932 statute that gave them the power to lend money as they wish, signed by another great Republican President, Herbert Hoover. But the point is that it was the Republican administration that said we had to do this. Yes, there was cooperation, the Republican leadership in the House, the majority in the Senate, believing that there would have been a terrible problem if it wasn't there. I do want to reiterate that I am now pleased, as Chairman of the Financial Services Committee, that there is this interest on the Republican side in restricting compensation. It has not previously been a strong part of their argument. However, we will return to the subject of this resolution. The resolution isn't binding, but it is a forerunner of what will be binding. The Committee on Financial Services will vote next week on binding legislation, and it will bring it to the floor the week after, which will embody much of this, and it will include an effort to deal with this retroactively. There will be legal questions raised, but the fact is that we will have binding legislation to embody this. This is an important statement. I would say this in closing, Mr. Speaker. We have people now at AIG deciding whether or not they are going to give their money back. The more they give back to us, the better we will be. It won't be totally conclusive. But to defeat this resolution because it says nice things about President Obama would be a grave error.

Mr. FRANK of Massachusetts. Mr. Speaker, I move to suspend the rules and agree to the concurrent resolution (H. Con. Res. 76) expressing the sense of the Congress regarding executive and employee bonuses paid by AIG and other companies assisted with taxpayer funds provided under the Troubled Assets Relief Program of the Secretary of the Treasury.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself 15 seconds to say that if the gentleman wants to ask me a question--I had said I hadn't heard it--if he would rephrase it, I will try to answer it.

Mr. FRANK of Massachusetts. I will continue to reserve.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 1 minute to the gentlewoman from Texas (Ms. Jackson-Lee).

Mr. FRANK of Massachusetts. Mr. Speaker, I reserve the balance of my time.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself 30 seconds to correct the gentleman from New Jersey. I have long thought that I pay closer attention to our colleague from Texas (Mr. Paul) than his Republican colleagues. He talked about legislation, but he was talking about, in part, the legislation that gives the Federal Reserve the ability to do this. The gentleman from New Jersey is incorrect. This was not created by the TARP legislation which the Congress passed at the request of President Bush, it was under legislation passed in 1932 which gave the Federal Reserve the authority. Mr. Bernanke was acting under that authority. So it is true that the actual loan was made under the administration of George Bush, but he was acting under authority signed by another great Republican President, Herbert Hoover.

Mr. FRANK of Massachusetts. Mr. Speaker, I continue to reserve the balance of my time.

Mr. FRANK of Massachusetts. I thank the gentleman. I will use it and then reserve the balance of my time. I was not a member of the conference committee. The Financial Services Committee was not directly involved in this. We were more constrained by what we thought was the germaneness to the recovery bill. So the answer is I am not familiar with whatever the reasons were as to why this was put in. I will say this: If there had been no language whatsoever, we still wouldn't have had the authority. In other words, what did survive was additional authority. Now, if there had been no bill whatsoever, we wouldn't have come even this close. But as to the specific question, the answer is I was not involved. I would also just say, as chairman of the Financial Services Committee, I monitor pretty closely what goes on. I am not aware of any Republican member of the Financial Services Committee who has approached us and asked us to toughen up compensation restrictions. This interest in compensation restrictions is a fairly new interest. I commend people. I think later in life, it's good to take up new things so you don't get stale. But I do want to note that it is a fairly newfound hobby of my colleagues on the other side. In fact, in September when the Bush administration said they were going to make the loan with no restrictions and we pushed for it----

Mr. FRANK of Massachusetts. I yield to the gentleman from Alabama.

Mr. FRANK of Massachusetts. Reserving the right to object, I'm not going to be told I have only 15 seconds to answer a question.

Mr. FRANK of Massachusetts. I will continue to reserve.