House and Senate leaders moved at breakneck speed Wednesday to turn outrage over bonuses at American International Group and other bailed-out companies into retribution, with votes beginning today to impose punishing new tax provisions on the firms.
Members didn’t want to go back home at the end of the week without acting to salve the public uproar over the $165 million in retention bonuses paid last week to employees of AIG’s financial products division, where risky bets are blamed for triggering a $170 billion taxpayer bailout of the company.
AIG Chief Executive Officer Edward Liddy said Wednesday that he had asked employees to voluntarily return at least half of the bonus money, but lawmakers dismissed that move as insufficient.
The new tax measures being offered by House and Senate lawmakers differ, but both would apply broadly to employees of companies receiving federal bailout help, not just AIG.
Speaker Nancy Pelosi (D-Calif.) prevailed upon Ways and Means Chairman Charlie Rangel (D-N.Y.) to put aside his concerns about using the tax code to penalize individuals and planned to put the tax bill on the House floor under suspension today.
“I expect to see an overwhelming vote, which will be an expression of the people’s anger and disgust,— House Majority Leader Steny Hoyer (D-Md.) said.
Bonuses paid in 2009 to employees of companies that accepted more than $5 billion in government aid would be subject to a 90 percent tax rate in the House bill, Rangel said. Employees with total incomes of less than $250,000 would be exempt.
“The Speaker said we have to do something and everybody agreed. We had an obligation to respond to the fears and anger of people, and every Member, Republican and Democrat, felt this,— Rangel said.
Rangel said he didn’t think simply appealing to the recipients of the bonuses to give up their bounty would work.
“I don’t think these are the type of people that you appeal to equity and justice,— he said.
Meanwhile, a parallel effort by the House Judiciary Committee to authorize the attorney general to go after “excessive— bonuses cleared the panel Wednesday and Chairman John Conyers (D-Mich.) said the bill could go to the floor next week, even as Democrats and Republicans on the committee worried it had been rushed too quickly and may be unconstitutional.
Republicans, for their part, trained their ire at the Obama administration and the growing bailout tab, with a few calling on Treasury Secretary Timothy Geithner to resign.
But Minority Leader John Boehner (R-Ohio) said during a Wednesday press conference with Senate leaders that more needs to be known before Geithner’s fate can be decided.
“I think what is needed at this point is that we need to know what the administration knew and when did they know it?— Boehner said. “Mr. Liddy, who is running the AIG on behalf of the federal government, must have had conversations [with administration officials]. He’s known about this problem for some time. Who did he talk to in the administration?—
Boehner told a Nashville, Tenn.-based radio station Wednesday afternoon that Geithner “was on thin ice.—
House Republicans also on Wednesday used a procedural motion to force a vote on a bill that would have directed the Treasury Department to produce a plan within the next two weeks to recoup the AIG bonuses and require the Treasury to approve all future bonus payments made by recipients of bailout dollars. The motion failed on a largely party-line tally.
House Financial Services Chairman Barney Frank (D-Mass.) said he is strongly urging the administration, as majority shareholders in AIG, to file a lawsuit against the recipients of the bonuses.
“That’s the cleanest way to do it,— Frank said.
The Massachusetts Democrat, who had earlier suggested a government takeover of the firm, also threatened to demand a subpoena if necessary to obtain names of AIG’s bonus recipients, although Liddy urged him not to do so over fear about the safety of his employees after receiving numerous death threats.
Liddy spent the day defending his decision to pay the compensation, which he said was made jointly with officials from the Federal Reserve.
The AIG executive said he feared that without the financial experts overseeing $1.6 trillion in derivatives and other complex contracts, the company could have a catastrophic default that would trigger bankruptcy and affect the broader economy.
Liddy, who works on a $1 salary and is not being paid a bonus, said he expected that many of the employees simply would have left the company if they weren’t paid their bonuses due under contracts signed before he took over.
As the House pressed ahead, the Senate Finance Committee was ironing out the details on a proposal to tax bonuses of any firm receiving government rescue funds at 70 percent. The proposal by Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) could be introduced as soon as today.
Grassley also requested an investigation by Treasury Department Inspector General Eric Thorson to look into the agency’s role in the bonuses.
Senators also continued to spar over a provision dropped in the $787 billion stimulus package that would have taxed bonuses paid by bailed-out firms.
“Clearly it has to be done. It should’ve been done,— said one of the sponsors, Sen. Olympia Snowe (R-Maine), adding that she supports Baucus’ plan to impose excise taxes on executive bonuses.
But Grassley, a conferee for the stimulus, blasted the move as a last-minute partisan effort.
“Every Republican on the conference committee was left out of the negotiations and consultations entirely,— Grassley said in a statement. “The bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate. There was no transparency, so the only way the public will ever know who added the language to protect bailout company bonuses is if someone from the small group of Democrats in the room says so.—
With the rush to legislate, some lawmakers threw up their hands in protest, fearing Members were acting too hastily.
At a briefing with reporters, Republican Policy Committee Chairman John Ensign (Nev.) called for a series of oversight hearings at the Finance Committee before passing any legislation because “usually when we rush into things around here we get things wrong.—
Jennifer Bendery, Jessica Brady and Jackie Kucinich contributed to this report.