H. R. 1424—12 
(B) reduction of loan principal; and 
(C) other similar modifications. 
(3) TENANT PROTECTIONS.—In the case of mortgages on 
residential rental properties, modifications made under para-
graph (1) shall ensure— 
(A) the continuation of any existing Federal, State, 
and local rental subsidies and protections; and 
(B) that modifications take into account the need for 
operating funds to maintain decent and safe conditions 
at the property. 
(4) TIMING.—Each Federal property manager shall develop 
and begin implementation of the plan required by this sub-
section not later than 60 days after the date of enactment 
of this Act. 
(5) REPORTS TO CONGRESS.—Each Federal property man-
ager shall, 60 days after the date of enactment of this Act 
and every 30 days thereafter, report to Congress specific 
information on the number and types of loan modifications 
made and the number of actual foreclosures occurring during 
the reporting period in accordance with this section. 
(6) CONSULTATION.—In developing the plan required by 
this subsection, the Federal property managers shall consult 
with one another and, to the extent possible, utilize consistent 
approaches to implement the requirements of this subsection. 
(c) ACTIONS WITH RESPECT
TO SERVICERS.—In any case in 
which a Federal property manager is not the owner of a residential 
mortgage loan, but holds an interest in obligations or pools of 
obligations secured by residential mortgage loans, the Federal prop-
erty manager shall— 
(1) encourage implementation by the loan servicers of loan 
modifications developed under subsection (b); and 
(2) assist in facilitating any such modifications, to the 
extent possible. 
(d) LIMITATION.—The requirements of this section shall not 
supersede any other duty or requirement imposed on the Federal 
property managers under otherwise applicable law. 
SEC. 111. EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE. 
(a) APPLICABILITY.—Any financial institution that sells troubled 
assets to the Secretary under this Act shall be subject to the 
executive compensation requirements of subsections (b) and (c) and 
the provisions under the Internal Revenue Code of 1986, as provided 
under the amendment by section 302, as applicable. 
(b) DIRECT PURCHASES.— 
(1) IN GENERAL.—Where the Secretary determines that the 
purposes of this Act are best met through direct purchases 
of troubled assets from an individual financial institution where 
no bidding process or market prices are available, and the 
Secretary receives a meaningful equity or debt position in the 
financial institution as a result of the transaction, the Secretary 
shall require that the financial institution meet appropriate 
standards for executive compensation and corporate govern-
ance. The standards required under this subsection shall be 
effective for the duration of the period that the Secretary holds 
an equity or debt position in the financial institution. 
(2) CRITERIA.—The standards required under this sub-
section shall include—
H. R. 1424—13 
(A) limits on compensation that exclude incentives for 
senior executive officers of a financial institution to take 
unnecessary and excessive risks that threaten the value 
of the financial institution during the period that the Sec-
retary holds an equity or debt position in the financial 
institution; 
(B) a provision for the recovery by the financial institu-
tion of any bonus or incentive compensation paid to a 
senior executive officer based on statements of earnings, 
gains, or other criteria that are later proven to be materi-
ally inaccurate; and 
(C) a prohibition on the financial institution making 
any golden parachute payment to its senior executive officer 
during the period that the Secretary holds an equity or 
debt position in the financial institution. 
(3) DEFINITION.—For purposes of this section, the term 
‘‘senior executive officer’’ means an individual who is one of 
the top 5 highly paid executives of a public company, whose 
compensation is required to be disclosed pursuant to the Securi-
ties Exchange Act of 1934, and any regulations issued there-
under, and non-public company counterparts. 
(c) AUCTION PURCHASES.—Where the Secretary determines that 
the purposes of this Act are best met through auction purchases 
of troubled assets, and only where such purchases per financial 
institution in the aggregate exceed $300,000,000 (including direct 
purchases), the Secretary shall prohibit, for such financial institu-
tion, any new employment contract with a senior executive officer 
that provides a golden parachute in the event of an involuntary 
termination, bankruptcy filing, insolvency, or receivership. The Sec-
retary shall issue guidance to carry out this paragraph not later 
than 2 months after the date of enactment of this Act, and such 
guidance shall be effective upon issuance. 
(d) SUNSET.—The provisions of subsection (c) shall apply only 
to arrangements entered into during the period during which the 
authorities under section 101(a) are in effect, as determined under 
section 120. 
SEC. 112. COORDINATION WITH FOREIGN AUTHORITIES AND CENTRAL 
BANKS. 
The Secretary shall coordinate, as appropriate, with foreign 
financial authorities and central banks to work toward the 
establishment of similar programs by such authorities and central 
banks. To the extent that such foreign financial authorities or 
banks hold troubled assets as a result of extending financing to 
financial institutions that have failed or defaulted on such financing, 
such troubled assets qualify for purchase under section 101. 
SEC. 113. MINIMIZATION OF LONG-TERM COSTS AND MAXIMIZATION 
OF BENEFITS FOR TAXPAYERS. 
(a) LONG-TERM COSTS AND BENEFITS.— 
(1) MINIMIZING NEGATIVE IMPACT.—The Secretary shall use 
the authority under this Act in a manner that will minimize 
any potential long-term negative impact on the taxpayer, taking 
into account the direct outlays, potential long-term returns 
on assets purchased, and the overall economic benefits of the 
program, including economic benefits due to improvements in 
economic activity and the availability of credit, the impact
H. R. 1424—14 
on the savings and pensions of individuals, and reductions 
in losses to the Federal Government. 
(2) AUTHORITY.—In carrying out paragraph (1), the Sec-
retary shall— 
(A) hold the assets to maturity or for resale for and 
until such time as the Secretary determines that the 
market is optimal for selling such assets, in order to maxi-
mize the value for taxpayers; and 
(B) sell such assets at a price that the Secretary deter-
mines, based on available financial analysis, will maximize 
return on investment for the Federal Government. 
(3) PRIVATE SECTOR PARTICIPATION.—The Secretary shall 
encourage the private sector to participate in purchases of 
troubled assets, and to invest in financial institutions, con-
sistent with the provisions of this section. 
(b) USE OF MARKET MECHANISMS.—In making purchases under 
this Act, the Secretary shall— 
(1) make such purchases at the lowest price that the Sec-
retary determines to be consistent with the purposes of this 
Act; and 
(2) maximize the efficiency of the use of taxpayer resources 
by using market mechanisms, including auctions or reverse 
auctions, where appropriate. 
(c) DIRECT PURCHASES.—If the Secretary determines that use 
of a market mechanism under subsection (b) is not feasible or 
appropriate, and the purposes of the Act are best met through 
direct purchases from an individual financial institution, the Sec-
retary shall pursue additional measures to ensure that prices paid 
for assets are reasonable and reflect the underlying value of the 
asset. 
(d) CONDITIONS ON PURCHASE AUTHORITY FOR WARRANTS AND 
DEBT INSTRUMENTS.— 
(1) IN GENERAL.—The Secretary may not purchase, or make 
any commitment to purchase, any troubled asset under the 
authority of this Act, unless the Secretary receives from the 
financial institution from which such assets are to be pur-
chased— 
(A) in the case of a financial institution, the securities 
of which are traded on a national securities exchange, 
a warrant giving the right to the Secretary to receive 
nonvoting common stock or preferred stock in such financial 
institution, or voting stock with respect to which, the Sec-
retary agrees not to exercise voting power, as the Secretary 
determines appropriate; or 
(B) in the case of any financial institution other than 
one described in subparagraph (A), a warrant for common 
or preferred stock, or a senior debt instrument from such 
financial institution, as described in paragraph (2)(C). 
(2) TERMS AND CONDITIONS.—The terms and conditions of 
any warrant or senior debt instrument required under para-
graph (1) shall meet the following requirements: 
(A) PURPOSES.—Such terms and conditions shall, at 
a minimum, be designed— 
(i) to provide for reasonable participation by the 
Secretary, for the benefit of taxpayers, in equity appre-
ciation in the case of a warrant or other equity security,
H. R. 1424—15 
or a reasonable interest rate premium, in the case 
of a debt instrument; and 
(ii) to provide additional protection for the taxpayer 
against losses from sale of assets by the Secretary 
under this Act and the administrative expenses of the 
TARP. 
(B) AUTHORITY TO SELL, EXERCISE, OR SURRENDER.— 
The Secretary may sell, exercise, or surrender a warrant 
or any senior debt instrument received under this sub-
section, based on the conditions established under subpara-
graph (A). 
(C) CONVERSION.—The warrant shall provide that if, 
after the warrant is received by the Secretary under this 
subsection, the financial institution that issued the warrant 
is no longer listed or traded on a national securities 
exchange or securities association, as described in para-
graph (1)(A), such warrants shall convert to senior debt, 
or contain appropriate protections for the Secretary to 
ensure that the Treasury is appropriately compensated 
for the value of the warrant, in an amount determined 
by the Secretary. 
(D) PROTECTIONS.—Any warrant representing securi-
ties to be received by the Secretary under this subsection 
shall contain anti-dilution provisions of the type employed 
in capital market transactions, as determined by the Sec-
retary. Such provisions shall protect the value of the securi-
ties from market transactions such as stock splits, stock 
distributions, dividends, and other distributions, mergers, 
and other forms of reorganization or recapitalization. 
(E) EXERCISE PRICE.—The exercise price for any war-
rant issued pursuant to this subsection shall be set by 
the Secretary, in the interest of the taxpayers. 
(F) SUFFICIENCY.—The financial institution shall guar-
antee to the Secretary that it has authorized shares of 
nonvoting stock available to fulfill its obligations under 
this subsection. Should the financial institution not have 
sufficient authorized shares, including preferred shares 
that may carry dividend rights equal to a multiple number 
of common shares, the Secretary may, to the extent nec-
essary, accept a senior debt note in an amount, and on 
such terms as will compensate the Secretary with equiva-
lent value, in the event that a sufficient shareholder vote 
to authorize the necessary additional shares cannot be 
obtained. 
(3) EXCEPTIONS.— 
(A) DE
MINIMIS.—The Secretary shall establish de 
minimis exceptions to the requirements of this subsection, 
based on the size of the cumulative transactions of troubled 
assets purchased from any one financial institution for 
the 
duration 
of 
the 
program, 
at 
not 
more 
than 
$100,000,000. 
(B) OTHER EXCEPTIONS.—The Secretary shall establish 
an exception to the requirements of this subsection and 
appropriate alternative requirements for any participating 
financial institution that is legally prohibited from issuing 
securities and debt instruments, so as not to allow cir-
cumvention of the requirements of this section.