Is Anyone Planning on Doing Anything About $1 Billion More in AIG Bonuses?
I’m trying to figure out the politics behind the bill moving swiftly through the House to tax bonuses paid to employees by TARP recipients. Obviously it’s an attempt to get in front of a tsunami of public rage that "nobody could have anticipated":
I interpreted this bill to mean that Congress doesn’t want to deal with forcing AIG to break the contracts that call for $1 billion more in bonus to be paid this year as a condition of receiving more funds. Lune over at Naked Capitalism reads it as a "brewing revolt" against Geithner by the House:
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.
Both could conceivably be true.
Kagro noted that on Tuesday, Rangel didn’t want any part of such a bill, but now he seems to be the author of it (PDF). The bill would apply a separate tax of 90% to bonuses paid by TARP recipients, and also apply to those paid by Fannie Mae and Freddie Mac.
According to Roll Call (subscription), bank lobbyists are flocking to Capitol Hill to oppose it. Baucus and Grassley have put forward their own Senate version of the bill that would levy a 35 percent tax on employees plus a 35 percent excise tax on the company that paid it. Part of the effort by bank lobbyists, no doubt, who seek to once again "narrow the breadth of the legislation" (just as they did with cramdown).
Why are lobbyists so freaked out? Roll Call offers a clue:
“The government shouldn’t prohibit expenses that will help strengthen the company,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable.
Bank lobbyists are worried about the health of the banks, I see. Or maybe not:
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.
So much for public spiritedness.
Meanwhile, proving that he’s never been more than a front for bankers who don’t want to pay their fair share of taxes, Grover Norquist is warning that voting for such a bill would break his "anti-tax pledge" that 172 Congressmen and 35 Senators signed.
And I’m listening to Mike Pence in the House, saying that the Republicans have a bill to force Treasury to recoup the AIG bonuses but the Democratic leadership won’t let it on to the floor.
It’s a smart move. As John Aravosis writes, the measure to tax these bonuses is really half-assed and doesn’t get to the heart of the problem — namely, the deal cut by Timothy Geithner calls for AIG to cut $1 billion more in bonus checks to be paid for in July and September of this year. The GOP bill has absolutely no chance of passing since there’s virtually no way these companies can take back bonuses that were paid with the approval of both Geithner and the Fed, pursuant to contracts that nobody (i.e., Eric Holder) has challenged the validity of. But, in the meantime, it gives the GOP a good reason to oppose the tax bill and not sound like they are complete tools for bank lobbyists, which they absolutely are.
The problem of these bonuses is not going away. The only struggle, as far as I can tell, is to see how little Congress and the administration can conceivably do about it.