The Grayson-Himes pay-for-performance legislation passed the House of Representatives in a 247-171 vote late Wednesday. House Democrats carried the vote with 237 in favor. Ten House Republicans also voted in favor of the bill, while eight House Democrats voted against it. The bill -- sponsored by Alan Grayson, D-Fla., and cosponsored by, among others, James Himes, D-Conn. -- would limit the compensation and specifically bonuses paid to top executives and employees at major financial institutions that have received capital from the Treasury Department through the Capital Purchase Program. Any firm that receives or has received a capital investment through TARP -- and including Fannie Mae (FNM), Freddie Mac (FRE) and the Federal Home Loan banks -- would be restricted from giving "unreasonable or excessive" compensation or any bonus "not directly based on performance-based measures," according to language in the bill. Treasury secretary Timothy Geithner would be required within 30 days of the bill's passage -- if it passes a Senate vote and final enactment -- to establish to "unreasonable or excessive" and "performance-based" standards that will be applied to financial institutions. Read the bill's text. The firms under compensation restrictions would be required to report annually on how many workers and employees received or will receive for the fiscal year total compensation over $500,000. The bill would also set up an executive compensation commission composed of nine members who would examine executive pay in terms of its linkage to overall performance. Firms that have entered an agreement to repay TARP funds would not be held to the restrictions of the bill. An exemption recently added to the bill would lift the restrictions from community banks -- or firms participating in TARP that have received capital contributions of no more than $250 million. For the remaining firms with excess of $250 million in government aid, however, the bill would mean strict compensatory regulation. There were at least 48 institutions -- 50, if automakers General Motors and Chrysler are included -- that fit the bill for this strict regulation, according to a HousingWire analysis of data provided by the Treasury through mid-March. "The taxpayers now have an ownership stake in these companies. And owners of companies set salaries for their employees," Grayson said in a media statement. "Any company bent on paying its employees unreasonable and excessive compensation can do so after the American taxpayers get their money back.” The legislation passed the House Committee on Financial Services in late March and now heads to a Senate vote. It has faced considerable controversy from Congressional Republicans who say such tight regulation of the banking industry may signal intrusive government control in other industries in the future. Fears of bank nationalization and unwanted regulation were fueled this week by the government-forced removal of GM CEO Rick Wagoner. Public outcry still lingers over the bonus fiasco at American International Group Inc. (AIG), where top executives at AIG Financial Products were awarded $165 million in bonus payments. The growing public outrage towards bankers, evident in the AIG bonus debacle, clearly has banking executives anxious to get out of the government’s back pocket as soon as possible, with four TARP recipients announcing Tuesday they had repaid TARP funds -- at a total of $338 million. New York-based Signature Bank (SBNY) returned $120 million to the Treasury, while Old National Bancorp (ONB) bought back all of the $100 million in stock from the Treasury, IBERIABANK Corp. (IBKC) returned $90 million and Bank of Marin Bancorp (BMRC) gave back $28 million. None of the four banks had received enough capital to be subject to the strict regulation under the bill, but the reception of the government's intrusions in the banking industry were apparent in the banks' media statements. “[B]y participating in [the TARP], we did our part to help stimulate the local economy during a volatile time for the financial markets,” said Bank of Marin president and CEO Russell Colombo. “Given the operating restrictions we experienced as a participant, we believe this decision is in the best interest of our customers, shareholders and employees.” Write to Diana Golobay at diana.golobay@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.