After the nonpartisan Congressional Budget Office (CBO) calculated the enormous costs of an all-encompassing health care scheme with a bloated public option, members of Congress from both parties asked for more due diligence before rubber stamping the plan. Yet today, the U.S. House of Representatives may rush through another piece of poorly designed command-and-control legislation that the CBO just yesterday said could have its own tremendous costs. Though advertised as giving shareholders more "say" over CEO pay, the "Corporate and Financial Institution Compensation Fairness Act of 2009 [H.R. 3269]," would give the government the power to ban performance bonuses for a wide variety of employees - including even office assistants and clerks - at a wide variety of firms. On Thursday, July 30, the CBO Cost Estimate for the bill, sponsored by House Financial Services Chairman Barney Frank (D-Mass.), found that its mandates would place untold costs on the private sector that could reach upwards of $139 million a year. The CBO report starkly states: "The requirements of H.R. 3269 would impose several private-sector mandates ... on publicly traded companies, financial institutions, institutional investment managers, and national securities exchanges and associations." CBO adds that "because the cost of some of the mandates would depend on federal regulations yet to be established," the total cost of the mandates may exceed the $139 million a year that under the Unfunded Mandates Reform Act, requires special scrutiny for its effects on the private sector. As CEI has repeatedly stated, regulatory costs should be seen as a tax. And this tax on publicly traded companies - that would frustrate the incentive pay necessary to foster growth in entrepreneurial firms-- may put a damper on the recent gains of the stock market and slow an economic recovery. Here is a summary, but by no means all-inclusive list, of destructive provisions of the bill
- Broad powers to ban a broad array of bonuses for a broad set of employees at a broad definition of "financial services" firms.
- Why mandate costly say-on-pay mechanisms that shareholders have voted down at many firms?