An outraged Congress threatened Tuesday to impose new taxes to recoup at least some of the $165 million in bonuses that insurance giant AIG awarded to executives and traders after getting billions in federal bailout money.
WASHINGTON — An outraged Congress threatened Tuesday to impose new taxes to recoup at least some of the $165 million in bonuses that insurance giant AIG awarded to executives and traders after getting billions in federal bailout money.
"The people who got those bonuses won't be able to keep all that money," Majority Leader Harry Reid declared on the Senate floor.
Senate Finance Committee Chairman Max Baucus suggested taxing away the bonuses. "What is the highest excise tax we can impose that will stand up in court?" Baucus asked. "Let's find out what it is."
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.
"It boggles my mind how these executives can be so unaware of what the American people are going through," said Ryan. He called his proposal "a wakeup call that the days of arrogance and greed on Wall Street are coming to an end. We will use any means necessary."
The Internal Revenue Service currently withholds 25 percent from bonuses less than $1 million and 35 percent for bonuses more than $1 million.
As outrage over the American International Group Inc. bonuses rose across the political spectrum, 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, President Barack 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.
"If they have any common sense at all ... they ought to give it back," House Majority Leader Steny Hoyer, D-Md., said Tuesday. "Have they no shame? Have they no sense of responsibility to the taxpayers of America?"
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.