Letter Opposing H.R. 1664
April 1, 2009
TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:
Although the U.S. Chamber of Commerce appreciates the serious and understandable public concern about excessive compensation at companies that receive federal funds through the Troubled Asset Relief Program (TARP), as well as Congress' prerogative to examine such compensation, the Chamber opposes H.R. 1664 because it would create unintended consequences that could hamper efforts to resolve the ongoing financial crisis and restore economic growth.
The Chamber believes that corporate executives' compensation should be premised on a balance of individual accomplishment, corporate performance, adherence to risk management, compliance with laws and regulations, and a focus on shareholder value. Accordingly, the Chamber has the following concerns relating to the bill:
1. H.R. 1664 would create disincentives for private enterprise to participate in the recently announced Public-Private Investment Program (PPIP).
The PPIP is designed to resolve the issue of toxic assets at the heart of the financial crisis. Under the PPIP, private entities will value and purchase toxic assets, and manage and dispose of the portfolios. By changing the compensation rules for TARP in midstream, H.R. 1664 would create a strong disincentive for any private entity to join a partnership with the federal government.
2. H.R. 1664 would foster uncertainty in business dealings, thereby eroding confidence and slowing economic activity.
H.R. 1664 would abrogate obligations in pre-existing contracts. This legislation sets a precedent that would leave every contract and business decision by a TARP company subject to Congressional review and second guessing. A potential Congressional veto of contract provisions may make counterparties reluctant to engage in business activities with TARP companies, thereby compounding problems in a fragile economy.
3. H.R. 1664 would make it difficult for companies to retain much needed talent.
Immediately following the announcement of compensation restrictions by the Obama Administration, published reports indicated that Deutsche Bank hired 12 high ranking Bank of America executives and that UBS was hiring financial advisors from TARP firms with compensation increases as high as 200%. With a global economy, the competition for talent is worldwide and onerous rules will place the American economy at a competitive disadvantage.
Moreover, the Chamber opposes the DeFazio Amendment. This amendment would abrogate existing contractual obligations, interfere with State laws regulating corporations and their structure, and set a precedent whereby government action can mandate the compensation of any employee.
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, opposes H.R. 1664 because its unintended consequences may cause further harm during these troubled times.
Sincerely,
R. Bruce Josten