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US House passes tax to recoup most of AIG bonuses
March 20, 2009, Friday
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Moving with unusual speed, the US House of Representatives yesterday passed a bill to tax bonuses to employees at companies getting federal bailout money and recoup most of the US$165 million paid to American International Group Inc executives.
AIG complied with a subpoena and provided details of bonus recipients to New York Attorney General Andrew Cuomo. But he said his office -- aware of threats made against AIG employees -- would conduct a risk assessment before releasing any names.
The House, responding quickly to public outrage over the bonuses after the giant insurer received up to US$180 billion in US aid, voted 328-93 to approve a 90 percent tax on bonuses for certain executives at companies getting government aid.
The tax would apply to executives with incomes over US$250,000 who worked for companies that received at least US$5 billion in federal aid. That would include others getting help, such as mortgage financing company Fannie Mae.
"The whole idea that they should be rewarded millions of dollars is repugnant to everything that decent people believe in," said Representative Charlie Rangel, the Democratic chairman of the tax-writing Ways and Means Committee.
Anger over the bonuses at AIG and other large companies that have received federal bailout money threatens to undermine confidence in President Barack Obama's efforts to solve the financial crisis and pull the economy out of a deep recession.
The Senate as early as Friday could consider its own plan to recoup the bonuses via a 70 percent excise tax for companies that received at least US$100 million from the US$700 billion bailout fund.
The two chambers would have to reconcile any differences to bills they pass before it could go to Obama for signing and become law.
GEITHNER TAKES RESPONSIBILITY
Treasury Secretary Timothy Geithner, who has come under heavy fire during the AIG scandal, said yesterday he took responsibility for the controversy surrounding bonus payments.
Geithner repeated in an interview on CNN that he first learned of the bonuses last Tuesday, March 10, and said that if fault was to be assigned for not knowing earlier, then it lay with him.
"On Tuesday I was informed about the full scale and scope of these specific bonus problems," Geithner said. "You know, it's my responsibility, I was in a position where I didn't know about these sooner, I take full responsibility for that."
The bonus flap expanded with Connecticut Attorney General Richard Blumenthal demanding AIG turn over a list of recipients and how much they received. He also pressed the employees to "do the right thing" and return the money.
In New York, Cuomo said he had already received details about who received the bonuses.
He also said Bank of America Corp was expected to hand over the names of the 200 top bonus earners at Merrill Lynch & Co from last year, another potential embarrassment for the bailout process.
Goldman Sachs Group Inc plans to respond publicly to what it described as misperceptions about its trading relationship with AIG after it was paid US$12.9 billion by AIG from bailout funds.
While many in Congress have called for quick moves to "claw back" the bonus money, some Senate Republicans are raising questions about whether legislation will pass quickly.
"Until we have hearings and we understand all this, we are not going to know what kind of fix to implement," Senate Republican Whip Jon Kyl told reporters.
AIG Chief Executive Edward Liddy told Congress on Wednesday he has asked employees to give back at least half of their retention awards and that some had already given back their entire bonuses -- which were awarded with the goal of keeping the company's top talent.
While nearly half of House Republicans, 85, voted to approve the bill, many were furious and blamed Democrats who control Congress and the White House for allowing the bonuses to be paid in the first place.
Some also questioned whether the legislation approved would survive court challenges. "It's unconstitutional what they want to do, it's wrong what they want to do," Representative Steve LaTourette said during floor debate.
House Speaker Nancy Pelosi defended the legislation, which limits the tax to those who make over US$250,000, saying it was done to avoid hurting rank and file workers.
AIG complied with a subpoena and provided details of bonus recipients to New York Attorney General Andrew Cuomo. But he said his office -- aware of threats made against AIG employees -- would conduct a risk assessment before releasing any names.
The House, responding quickly to public outrage over the bonuses after the giant insurer received up to US$180 billion in US aid, voted 328-93 to approve a 90 percent tax on bonuses for certain executives at companies getting government aid.
The tax would apply to executives with incomes over US$250,000 who worked for companies that received at least US$5 billion in federal aid. That would include others getting help, such as mortgage financing company Fannie Mae.
"The whole idea that they should be rewarded millions of dollars is repugnant to everything that decent people believe in," said Representative Charlie Rangel, the Democratic chairman of the tax-writing Ways and Means Committee.
Anger over the bonuses at AIG and other large companies that have received federal bailout money threatens to undermine confidence in President Barack Obama's efforts to solve the financial crisis and pull the economy out of a deep recession.
The Senate as early as Friday could consider its own plan to recoup the bonuses via a 70 percent excise tax for companies that received at least US$100 million from the US$700 billion bailout fund.
The two chambers would have to reconcile any differences to bills they pass before it could go to Obama for signing and become law.
GEITHNER TAKES RESPONSIBILITY
Treasury Secretary Timothy Geithner, who has come under heavy fire during the AIG scandal, said yesterday he took responsibility for the controversy surrounding bonus payments.
Geithner repeated in an interview on CNN that he first learned of the bonuses last Tuesday, March 10, and said that if fault was to be assigned for not knowing earlier, then it lay with him.
"On Tuesday I was informed about the full scale and scope of these specific bonus problems," Geithner said. "You know, it's my responsibility, I was in a position where I didn't know about these sooner, I take full responsibility for that."
The bonus flap expanded with Connecticut Attorney General Richard Blumenthal demanding AIG turn over a list of recipients and how much they received. He also pressed the employees to "do the right thing" and return the money.
In New York, Cuomo said he had already received details about who received the bonuses.
He also said Bank of America Corp was expected to hand over the names of the 200 top bonus earners at Merrill Lynch & Co from last year, another potential embarrassment for the bailout process.
Goldman Sachs Group Inc plans to respond publicly to what it described as misperceptions about its trading relationship with AIG after it was paid US$12.9 billion by AIG from bailout funds.
While many in Congress have called for quick moves to "claw back" the bonus money, some Senate Republicans are raising questions about whether legislation will pass quickly.
"Until we have hearings and we understand all this, we are not going to know what kind of fix to implement," Senate Republican Whip Jon Kyl told reporters.
AIG Chief Executive Edward Liddy told Congress on Wednesday he has asked employees to give back at least half of their retention awards and that some had already given back their entire bonuses -- which were awarded with the goal of keeping the company's top talent.
While nearly half of House Republicans, 85, voted to approve the bill, many were furious and blamed Democrats who control Congress and the White House for allowing the bonuses to be paid in the first place.
Some also questioned whether the legislation approved would survive court challenges. "It's unconstitutional what they want to do, it's wrong what they want to do," Representative Steve LaTourette said during floor debate.
House Speaker Nancy Pelosi defended the legislation, which limits the tax to those who make over US$250,000, saying it was done to avoid hurting rank and file workers.
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