Congress looking at huge taxes on AIG bonuses
Washington DC — (AP) - Congressional Democrats vowed Tuesday to all but strip AIG executives of their $165 million in bonuses as expressions of outrage swelled in Congress over eye-catching extra income for employees of a firm that has received billions in taxpayer bailout funds.
"Recipients of these bonuses will not be able to keep all of their money," declared Senate Majority Leader Harry Reid, in an unusually strong threat delivered on the Senate floor.
"If you don't return it on your own we will do it for you," said Chuck Schumer of New York.
The bonuses were paid legally, part of a program that had been disclosed in advance in filings that American International Group Inc. made with the government.
House and Senate Democrats were crafting separate bills to tax up to 100 percent of generous bonuses awarded by companies rescued by taxpayer money. Republicans said President Barack Obama's administration should have done more to stop the bonuses.
AIG would not be the only firm named by either Democratic bill, but there was no question whose executives inspired the legislation.
"They're not going to get the financial benefit of those bonuses," said Senate Finance Committee Chairman Max Baucus, D-Mont.
In the House, Reps. Steve Israel, D-N.Y., and Tim Ryan, D-Ohio, introduced a bill that would that would tax at 100 percent bonuses above $100,000 paid by companies that have received federal bailout money.
"We will use any means necessary," said Ryan. "It boggles my mind how these executives can be so unaware of what the American people are going through."
The Internal Revenue Service currently withholds 25 percent from bonuses less than $1 million and 35 percent for bonuses more than $1 million.
As lawmakers stampeded to the microphones over the American International Group Inc. bonuses, the Obama administration said it was trying to put strict limits on how future government bailout dollars could be used.
But sharp questions have been raised about what the administration knew about the bonuses - and when.
Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, chastised the administration, saying Treasury Secretary Timothy Geithner should have blocked the payouts.
"I don't know if he should resign over this," the Alabama senator said. "He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this."
AIG also was raked over the coals at a banking committee hearing on regulating the insurance industry.
"One way or another, we're going to try to figure out how to get these resources back," said Christopher Dodd, D-Conn., the panel's chairman.
"This is ridiculous," exclaimed Sen. Jon Tester, D-Mont. He said AIG executives "need to understand that the only reason they even have a job is because of the taxpayers."
Edward Liddy, the CEO of American International Group Inc., is to testify Thursday before a House subcommittee.
On Monday, Obama lambasted the insurance giant for "recklessness and greed" and pledged to try to block payment of the bonuses. Obama said he had directed Geithner to determine whether there was any way to retrieve or stop the bonus money.
The financial bailout program remains politically unpopular and has been a drag on Obama's new presidency, even though the plan began under his predecessor, President George W. Bush.
The White House is aware of the nation's bailout fatigue; hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while many others who have done no wrong have paid the price.
Sen. Charles Grassley suggested in an Iowa City radio interview on Monday that AIG executives should take a Japanese approach toward accepting responsibility by resigning or killing themselves.
"Obviously, maybe they ought to be removed," the Iowa Republican said. "But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide."
Grassley spokesman Casey Mills said the senator wasn't calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.
New York Attorney General Andrew Cuomo said he has issued subpoenas for the names of AIG employees given bonuses despite their possible roles in its near-collapse.
Cuomo said his office will investigate whether the bonus payments are fraudulent under state law because they were promised when the company knew it wouldn't have the money to cover them.
AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history, and it has benefited from more than $170 billion in a federal rescue.
(Copyright 2009 by The Associated Press. All Rights Reserved.)