Submitted by Lune
Roll Call is reporting (subscription required) that the House and Senate are taking up measures for taxing bonuses paid out by companies in 2009 that accepted bailout money:
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.
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.
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, [Chairman of House Ways & Means Cmte, Charles] Rangel said. Employees with total incomes of less than $250,000 would be exempt.
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.
Also interesting to note is that it appears that Congress is growing impatient with Obama and his team, and is moving ahead with measures that Obama’s economic team (namely Geithner and Summers) oppose. You’ll recall that in February, the NY Times reported that:
The Obama administration’s new plan to bail out the nation’s banks was fashioned after a spirited internal debate that pitted the Treasury secretary, Timothy F. Geithner, against some of the president’s top political hands.
In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.
Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
In the end, Congress went along with Geithner and Obama. But now we’re seeing the following (again from Roll Call):
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.
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.
It appears that Congress may finally be growing impatient with Obama. If these Congressional initiatives pass (and Speaker Pelosi seems likely to push these through in the next couple of days), they will be a direct rebuke to Geithner’s vision of providing bailout money with minimal strings attached. While the effectiveness of these new tax plans is yet to be seen (I have no doubt executives will be hiring the best tax lawyers around to skirt the regulations), just the fact that Congress is moving more quickly than Obama on these matters is bad news for the Administration.
Obama still needs credibility with and deference from Congress for coming legislation to deal with the automakers (scheduled to present their viability plans by the end of this month, and likely requiring further federal funds), plus any new initiatives after the G20 meeting, plus whatever random blow-up du jour in the financial world that comes our way. A loss of that credibility would be devastating to his ability to shepard further legislation through Congress. Hopefully, he’s learning his lesson fast and will start taking into account the interests of the common weal rather than just the interests of Geithner and his Wall St. pals.
Financial services lobbyists have moved into hyperdrive, engaging in a behind-the-scenes counterattack after lawmakers trained their eyes on all bonuses paid out by struggling banks.
Banks that took millions of dollars in federal bailout money and their trade groups held several conference calls Wednesday to figure out how to respond to the swift-moving bonus bills, according to lobbyists who participated in the calls.
The banks’ main goal is to narrow the breadth of the legislation as much as possible, and they are targeting key players on the House Financial Services Committee and Senate Banking, Housing and Urban Affairs Committee.
One interesting caveat: many lobbyists themselves might come under the tax provisions:
Lobbyists who work for federally bailed-out banks also have a vested interest in seeing the legislation stopped. Most senior lobbyists at banks such as Citigroup, JPMorgan Chase and Bank of America, earned well over the $50,000 bonus threshold in the Senate legislation.
Still, as some of those lobbyists look to exit struggling banks, not everybody is rushing to weigh in.
Some in-house lobbyists are reluctant to use their own political capital to push back on the issue, given the widespread bipartisan anger over bonus payments, according to a financial services lobbyist.
I’ll post an update when I can get a public link for the Senate’s bill.
Folks, if you wish to see this legislation passed, you know what to do. (How many constituent phone calls or letters does it take to outweigh one lobbyist’s opinion? Quite a few, unfortunately…)