Several key Democrats expressed reservations on Sunday about Congress’ rush to use the tax code to recover $165 million in controversial bonuses for executives at insurance giant and taxpayer bailout recipient American International Group.
“I’ve got my doubts whether that’s the best way to do this. I think there are certain Constitutional questions about the imposition of a tax on a limited group of people,— said Senate Budget Chairman Kent Conrad (D-N.D.) on ABC’s “This Week— Sunday.
Conrad and others said the U.S. government should use it’s 80 percent ownership stake in AIG to get the bonus money returned, or should put more pressure on AIG chief executive Edward Liddy to renegotiate those retention bonus contracts. Through the Federal Reserve and the Congressionally authorized financial industry rescue, AIG has received $170 billion in taxpayer funds.
The Senate is expected to take up a bill to place a highly punitive tax on bonuses given out by recipients of Wall Street bailout funds, while the House passed their bill to tax those payments at 90 percent last week.
“I voted for the bill. I was not a major advocate for it,— said House Financial Services Chairman Barney Frank (D-Mass.) on CBS’ “Face the Nation.— Frank suggested the government — as a shareholder in the company — should sue AIG.
Even Vice President Joseph Biden’s chief economic adviser, Jared Bernstein, said there were reservations within the Obama administration about signing the measure.
“Clawing back old bonuses really does raise Constitutional concerns,— Bernstein said on “This Week.— “I think the president would be concerned that … the House bill may go to far. … But let’s see what comes out of the Senate. The president has not said he won’t sign this bill.—
Meanwhile, House Ways and Means Chairman Charlie Rangel (D-N.Y.) denied that he reversed positions on the House’s bill. Rangel originally said last week he did not believe the tax code should be used to go after people in that way, but he eventually ended up sponsoring the bill.
Rangel reiterated his distaste at using the tax code to punish bailout recipients, but he said it was necessary to send a strong message.
“It may allow them to understand what the American people think of their method of compensation,— Rangel said on “Fox News Sunday.— “We have to level the playing field so some people understand the results of their problem with greed.—
But Sen. Chuck Grassley (R-Iowa) said he wants the Senate to move forward with its bill, which he helped write.
“It looks to me that Congress’ best leverage is taxes,— Grassley said on CBS. However, he said he sensed reluctance by Senate Majority Leader Harry Reid (D-Nev.) to bringing the measure up, considering Reid scheduled a less significant bill for floor action at the beginning of this week.
But other Senate Republicans urged caution. Sen. Richard Shelby (R-Ala.) — appearing on “Fox News Sunday— — and Sen. Susan Collins (R-Maine) on “This Week— said using the tax code as a weapon was not a good idea.
Shelby also said Treasurer Secretary Timothy Geithner is on thin ice in Congress for his role in the continuing scandal over taxpayer money being used for bonuses at insurance giant AIG.
“If he keeps going on this way, he won’t last long,— Shelby said, adding that Geithner was on “shaky ground.—
Shelby also predicted that Geithner would “have to do a 180 degree turnaround in order to be a successful Treasury secretary.—
Shelby, who serves as ranking member on the Senate Banking, Housing and Urban Affairs Committee, stopped short of calling for Geithner to resign, as some of his GOP colleagues have done.
Geithner has come under fire for failing to force AIG to rescind their bonuses as well as for advocating that the Senate protect contractual bonuses that were entered into prior to the enactment of legislative language restricting them. The Senate originally pursued a measure that would have limited past and future bonuses.