(Recasts with bill passage, fresh quotes)

By David Lawder

WASHINGTON, April 1 (Reuters) - The U.S. House of Representatives on Wednesday approved legislation to curb "excessive" employee pay at financial firms that receive government bailout funds, a measure that could supplant an earlier effort to heavily tax executive bonuses.

The bill, which passed on a 247-171 vote, would give the U.S. Treasury broad powers to prohibit "unreasonable and excessive" compensation and bonuses that are not based on performance standards.

The new curbs would apply to all employees, not just executives, of firms that have received capital investments from the Treasury's $700 billion financial rescue fund. The standards also would cover compensation paid to an employee after leaving a firm or before joining it.

The "Pay for Performance Act of 2009" is among a number of efforts by Congress to claw back bonuses and curb pay in the wake of public anger over recent executive bonuses at insurer American International Group (AIG.N: Quote, Profile, Research), which has received a bailout worth up to $180 billion.

"The Pay for Performance Act is based on two simple concepts. One, no one has the right to get rich off taxpayer money, and two, no one should get rich off abject failure," said one of the bill's authors, Representative Alan Grayson, a Florida Democrat who co-authored the measure. "We should not pay an arsonist to put out his own fire, and we should not be paying an executive to ruin his own bank."

The measure is largely expected to sideline a bill previously passed by the House of Representatives that aimed to impose a 90 percent tax on bonuses for certain executives at companies that receive taxpayer bailouts. That measure appeared to be losing momentum in the Senate.

The new and less aggressive approach would authorize the Treasury to provide the guidance on what is unreasonable or excessive, and what constitutes performance-based pay. Firms that pay back their government funds or set up a repayment schedule with the Treasury will no longer have to comply with the limits.