Blog - Articles Tagged 'Bonuses'

It’s none other than A.I.G. Chairman and Chief Executive Officer, Edward M. Liddy. I’m not sure exactly how long this has been planned, but, for Liddy, this is awful timing given the recent news that his company, which has taken $170 billion in taxpayer bailout money, is paying out $165 million in bonuses to their executives:

Washington, DC – Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the Subcommittee will hold a hearing to fully examine the American International Group (AIG), how it got into its current situation, why it has received so much federal assistance, and how to move forward.

“The federal government has provided AIG with access to well over $150 billion in federal aid to protect the global economy,” said Chairman Kanjorski. “Unfortunately, taxpayers do not understand how AIG ended up in such a terrible situation, nor do they understand why the federal government continues to give it money. We must assess AIG’s progress, as well as how we move forward to ensure that any taxpayer money AIG receives is spent efficiently and effectively.”

I think it’s safe to assume that they’ll also be chatting about those bonuses.

(h/t @KagroX)

As David Waldman at CongressMatters points out, the scandal over executive bonuses at A.I.G. has set off a race to the hopper. The legislative solutions that’s picking up the most steam is Rep. Carolyn Maloney’s [D, NY-14] plan to levy a 100 percent tax on bonuses to AIG execs that are not related to a commission.

The bill’s not up on OpenCongress yet- we’ll update when it is. Here’s the text of a letter she sent around yesterday to members of the House:

Dear Colleague:



Like many of you, I was outraged to learn over the weekend that AIG is paying out another $165 million in bonus compensation. For a company that has required $170 billion in U.S. taxpayer assistance and is 80% owned by the United States Government, this is clearly unacceptable. That is why I will be introducing legislation that will instruct the Secretary of the Treasury and the Internal Revenue Service to develop guidelines that tax at 100% any bonus compensation that is not directly related to a commission for any recipient of TARP funds where the United States government is the majority owner of the company. This will allow AIG to continue to meet their “contractual obligation” to pay these bonuses, but will ensure that the recipients are not allowed to keep this money.



If you would like to cosponsor this legislation or if you have any questions, please do not hesitate to contact me or Edward Mills in my office at (202) 225-7944 or edward.mills@mail.house.gov.



Sincerely,



CAROLYN B. MALONEY



Member of Congress

Jane Hamsher at FireDogLake uses OpenCongress’s legislative version tracking tool to research the Treasury Department’s claim that Sen. Christopher Dodd [D, CT] inserted a provision in the stimulus bill (H.R. 1) that allowed the A.I.G. bonuses to go forward.

By comparing the Senate version of the bill to the final conference version of the bill that was signed into law, she shows that a provision to block bonuses retroactively on TARP contracts, inserted by Dodd in the Senate bill, was actually taken out by the conference committee.

Here’s a link to that section of the bill. Right now it goes to a blank portion of the bill text (because it was removed), but click “show changes” at the top of the screen and you’ll see, in red, the retroactive bonus blocking provision, reportedly inserted by Dodd, that was taken out.

Hamsher: “who pushed back against Dodd, and told him to neuter the provision? The ”http://online.wsj.com/article/SB123457165806186405.html?mod=testMod">WSJ says Geithner and Summers:"

The administration is concerned the rules will prompt a wave of banks to return the government’s money and forgo future assistance, undermining the aid program’s effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.

As you have probably heard, the House this afternoon passed a bill (H.R. 1586) to impose a 90 percent tax on bonuses to employees at financial institutions that has received bailout money. The bill would levy the tax on any bonuses from bailed out firms paid out in 2009 to individuals with incomes over $250,000.

The final vote, which required a 2/3rds majority for passage because it was considered under suspension, was 328-93, with 10 not voting. (click here for full details, how each Rep. voted). Eighty-seven Republicans and six Democrats voted against it. The dissenting Democrats were:

Rep. Melissa Bean [D, IL-8]
Rep. Larry Kissell [D, NC-8]
Rep. Michael McMahon [D, NY-13]
Rep. Walter Minnick [D, ID-1]
Rep. Harry Mitchell [D, AZ-5]
Rep. Victor Snyder [D, AR-2]

It’s an interesting position, a couple of these Dems do a lot of aisle crossing (Bean, Minnick), but the others are generally more rank and file, though from not-solidly-Democratic districts. I’m looking for statements from them on their votes, I’ll update this post when/if I find them.

On a slightly different beat, Sunlight Foundation’s Paul Blumenthal has a good take on today’s vote:

But why such a rush? The bill, introduced by Rep. Charlie Rangel (D-NY), yesterday, was available less than a day before lawmakers voted on it. Shouldn’t Congress – and the public – get more time to read the bill? After all, it was because Congress was in a hurry before that it got itself into such a mess in the first place.

The language that was taken out of the stimulus during conference negotiations that would have blocked the AIG bonuses may not have been taken out if that bill wasn’t rushed through so quickly. If there was time to notice that a change had been made freeing up CEOs at bailed-out banks to get huge taxpayer-funded bonuses, public opposition would have kept Congress from passing the bill.

The Senate will be taking up their own version of the bonus tax in the next couple of weeks. Senate Majority Leader Harry Reid (D-NV) tried this afternoon to pass it quickly, but Sen. Jon Kyl (R-AZ) objected. Congress Matters has posted a summary of the Senate version.

President Obama says he’s looking forward to getting the final bill and, presumably, signing it into law.

UPDATE: Here’s the Senate version of the bill that will be voted on soon:

S. 651 – Compensation Fairness Act of 2009

The bill would tax companies giving out bonuses since the beginning of 2009 at 35 percent, plus individuals receiving the bonuses at 35 percent. Unlike the House bill, it has no minimum income threshold.

While the 90-percent bailout bonus tax bill has basically stalled out in the Senate, there’s a new bill coming to the floor of the House this week that is designed to block future bonuses – like the $1 billion in AIG bonuses scheduled for later this year – from being paid out. House Progressive Caucus member Rep. Alan Grayson [D, FL-8] is teaming up with New Democrats member Rep. James Himes [D, CT-4] on a bill, the Pay for Performance Act, to freeze executive bonuses at companies receiving bailout money until they are in a position to start repaying the government.

Here’s Rep. Grayson [pictured] on the principles behind the bill:

“This bill is based on two simple concepts. One, no one has the right to get rich off taxpayer money. And two, no one should get rich off abject failure,” Congressman Grayson said. “An economy in which a bank executive can line his own pocket by destroying his company with risky bets is an economy that will spiral downwards. And a government that hands out money to such executives is a government that fails to protect the taxpayers.”

The bill would prohibit financial institutions that have received federal bailout money from paying out “unreasonable or excessive” bonuses to any executive or employee under any pre-existing contracts, or from entering into new bonus contracts.

How is “unreasonable or excessive” defined in the bill, you may ask? Well, it’s not. But the bill directs the Secretary of the Treasury to establish the definition of an unreasonable or excessive bonus for the purpose of carrying out the prohibition. To help the Treasury set the new rules, the bill provides four standards that financial institutions should be required to consider when determining whether or not they can pay out a bonus or negotiate a new bonus contract under the new rules:

(i) the stability of the financial institution and its ability to repay or begin repaying the United States for any capital investment received under this title;

(ii) the performance of the individual executive or employee to whom the payment relates;

(iii) adherence by executives and employees to appropriate risk management requirements;

(iv) other standards which provide greater accountability to shareholders and taxpayers.

So, this is the essentially the third (and strongest) attempt to get the Treasury to make rules to block bailed-out companies from paying big executive bonuses. The first, included in the original Bush-Paulson bailout bill, failed. The second, contained in Barney Frank’s TARP Reform bill and transformed into a voluntary effort from the Administration didn’t stop the AIG bonuses. Will the public sentiment post-AIG bonuses help the Treasury make strong and effective rules that actually block taxpayer-funded executive bonuses at failing companies?

The bill was approved by the House Financial Services Committee last week by a vote of 38-22. It is scheduled from consideration from the House this week, probably on Wednesday.

UPDATE: This amendment (.pdf) from Rep. Brad Miller [D, NC-13] that was approved during the Financial Services markup appears to be aimed at helping the Treasury create strong new rules:

Page 2, line 22, after “Secretary” insert “, in consultation with the Chairperson of the Congressional Oversight
Panel established under section 125,”.

Page 3, line 6, after “Secretary” insert “, in consultation with the Chairperson of the Congressional Oversight Panel established under section 125”.