TARP Limits on Executive Compensation
On February 17, 2009 President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA of 2009). This act is more commonly known as the Stimulus package or the Stimulus bill. The main purpose of the act is to stabilize the US economy with a large injection of federal funds. However, the ARRA of 2009, does also address issues with the “Trouble Asset Relief Program” (TARP) enacted in fall 2008 which was part of the Emergency Economic Stabilization Act (EESA). The media more commonly refers to TARP as the Banking Industry Bailout.
The main focus of this writing is to summarize Title VII of the ARRA of 2009 called “Limits on Executive Compensation.” This title specifically focuses on requirements and/or restrictions put on banks that have or will receive TARP assistance from the US Treasury. Section 7001 of ARRA of 2009 amends Section 111 of the Emergency Economic Stabilization Act of 2008. Please note that the amount of TARP assistance taken by an institution will determine which officers and employees are covered by this section (see Table 1). The most important requirements and/or restrictions are listed below: