With the prospects of the stock market—and perhaps the U.S. economy—collapsing under the weight of complex mortgage-based investments whose value has evaporated, Congress is cobbling together legislation to enact a Treasury Department rescue.

At press conferences on Monday, September 22, several congressional leaders projected that a bill could be voted on at the end of the week.

But rather than just authorizing $700 billion for the administration to purchase sour assets from financial companies, Democrats want to add provisions to the bill that they say would assist homeowners and increase transparency, accountability and oversight of the bailout.

One area they are targeting is executive compensation. Rep. Barney Frank, D-Massachusetts and chairman of the House Financial Services Committee, and Sen. Christopher Dodd, D-Connecticut and chairman of the Senate Banking Committee, are drafting similar bills that would restrict executive pay at institutions that sell assets to the government.

Frank and Dodd would limit incentives and severance pay and would include a “claw-back” provision that would enable companies to recoup compensation that was based on earnings or gains that later proved to be inaccurate.

“Democrats believe that there should be limits on compensation for executives of companies who benefit from this legislation so that the American people don’t see their tax dollars spent on exorbitant corporate pay and golden parachutes,” said Senate Majority Leader Harry Reid, D-Nevada, in remarks prepared for a floor speech. “The American people earn their pay through honest hard work, and so should CEOs.”

In a meeting with reporters on September 22, Frank said, “It is inconceivable that taxpayer money should be put at risk … for people who are rewarded for their mistakes.”

The Bush administration and the Senate Republican leader are resisting additions like executive pay to the bailout.

“This stabilization plan gives us an opportunity … to contain the problem from spreading to Main Street,” said Sen. Mitch McConnell, R-Kentucky and the Senate minority leader, in a floor speech. “Surely we can all agree to work with each other and stand up for the American people—instead of using this bill as fly paper for partisan add-ons.”

But there was at least one indication that executive pay reform might make it into the bailout bill.

“Some element of [executive compensation] has to be in the package,” said Rep. Mel Martinez, R-Florida and a member of the Senate Banking Committee. “That’s an issue that on a bipartisan basis we want to see something done.”

Martinez spoke after a September 22 Capitol Hill media availability featuring Republicans and Democrats from the panel after they met to discuss the bill.

An executive-compensation advocate cautions against congressional action on pay. Charles Tharp, executive vice president for policy at the Center on Executive Compensation, argues that the pay decision should rest with a company’s board of directors.

About 40 percent of Fortune 100 companies and 28 of the 30 companies that make up the Dow Jones Industrial Average already have claw-back procedures, Tharp said. He’s not certain how many companies have used them.

“A legislative solution would have the unintended consequence of discouraging appropriate incentives for risk taking,” Tharp said. The executive pay center is based in Washington and is sponsored by the HR Policy Association.

An increasing number of companies are requiring executives to include company stock as part of their pay, Tharp said. That way, the executive is hurt, along with shareholders, if the price falls.

“That’s been a clear trend over the last few years,” Tharp said.

Frank bristled at the notion that opposition from the business community to executive pay provisions might hamstring Democratic efforts to expand the bailout bill.

“Some CEOs put their ability to get unrestricted compensation, including rewards for failure, over and above helping the economy,” he said.