Note to participants in the Troubled Assets Relief Program: House Financial Services Committee Chairman Barney Frank (D-Mass.) has introduced legislation to amend the program that would, among other things, impose new limits and reporting requirements on companies that take TARP money.

The bill, known as the TARP Reform and Accountability Act, will “strengthen accountability, close loopholes, increase transparency, and require Treasury to take significant steps on foreclosure mitigation,” according to a statement released by Frank.

Among other things, it would require institutions that receive funding to report at least quarterly on their use of the funding and would require TARP recipients to reach agreement with regulators and Treasury on how the funds are to be used and benchmarks they’re required to meet.

The bill would also apply the non-tax executive compensation restrictions from the Emergency Economic Stabilization Act of 2008 across the board for new receipt of TARP funds other than small financial institutions. Those provisions bar incentives that encourage executives to take excessive risks; provide for claw-back of compensation received based on materially inaccurate statements; and prohibit all golden parachute payments for the duration of the Treasury’s investment.

The bill would also apply stricter auto bill executive compensation requirements to any new receipt of TARP funds, including the limits on bonus or incentive compensation to the 25 most highly compensated employees; the prohibition of any compensation plan that would encourage manipulation of earnings to enhance compensation; and the divestment of private aircraft or leases.

The Act would also provide Treasury authority to apply the expanded executive compensation provisions retroactively to existing recipients of direct assistance and would prospectively remove a de minimus exception under which institutions smaller than $300 million in assets aren’t subject to the golden parachute limitations in auction purchases of troubled assets.

Frank’s committee held a hearing to discuss priorities for the next Administration and the use of TARP funds under EESA. Meanwhile, the Congressional Oversight Panel, the body created by Congress to review the state of financial markets and the regulatory system, has slated a public hearing for today, Jan. 14, on regulatory reform of the financial sector.

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