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Anger at AIG Continues as House Passes Tax on Bonuses

The House voted Thursday to impose a 90 percent tax on some bonuses at AIG and other bailout-funded companies. Editorial writers describe reaction to the controversy across the country.

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    Congress made the first move today to get back the AIG bonus money. The House approved heavy taxes on those who received the $165 million last weekend, but the vote came amid an escalating war of words over who's to blame.

    NewsHour correspondent Kwame Holman has our lead story report.


    The bill was the work of House Democrats, and it took aim at bonuses paid at AIG and other firms getting government rescue funds.


    We will not tolerate these actions. We're not going to wring our hands, shake our heads, look at our feet, and mumble, "Ain't it a shame?" Starting right here, right now, we are saying, "No more." We are saying, "Give us our money back!" And we will not stop until we get it back.


    The plan is to levy a 90 percent tax on the bonuses. It's triggered if an employee has an income of more than $250,000 and if his or her company received at least $5 billion in government aid.

    That also would include mortgage-lending giants Fannie Mae and Freddie Mac, now under government control. They've reported plans to pay bonuses of up to $600,000 to top executives.


    This will be a 15-minute vote.


    The bill passed 328-93. Nearly all Democrats supported it, but Republicans were evenly divided: 85 voted yes, 87 voted no.

    Some, including California's Dan Lungren, said it would violate the Constitution by singling out specific companies for punitive taxation.

  • REP. DAN LUNGREN, R-Calif.:

    If we overturn the Constitution to show our outrage, no single American is safe. Because in the future what we will do is say we have a precedent that, when we have an unpopular group, when we have a group that deserves some punishment, we won't go through the real laws. What we'll do is we will pass a new tax law with confiscatory rates and say, "We've done it for the American people."


    In response, Texas Democrat Sheila Jackson Lee said there's no question the measure would survive any legal challenge.


    I'm prepared to battle in the courts. Why? Because they look at issues of equity. What does equity mean? It means, who's in here with unclean hands?

    And if there is a situation where they are taking federal money, such as AIG, and all of a sudden they give retention bonuses, our courts will look at this legislation and say it is fair to give the money back to the American people because the circumstances have changed.


    But Republicans also charged the real issue was that Democrats opened the door to the AIG bonuses in the economic stimulus bill approved last month.


    But almost every person on the other side of the aisle voted for the stimulus bill that had the provision in that protected, authorized, and allowed these bonuses, and today they're shocked.

    Now, Ross Perot, when he ran for president in 1992, he talked about the "giant sucking sound." Well, today there's another giant sucking sound going on in Washington, D.C., and that's the tightening of sphincters on both ends of Pennsylvania Avenue as people are having to explain who put into the stimulus bill this provision of law.


    Some of the finger-pointing in the halls of Congress focused on Christopher Dodd, the Senate Banking Committee chairman. He amended the stimulus bill last month to cap bonuses, but then he agreed to change it, exempting bonus agreements already in effect, such as those at AIG.

    Dodd told CNN last night the Obama administration sought the change.

  • SEN. CHRIS DODD, D-Conn.:

    The alternative was losing, in my view, the entire section on executive excessive compensation. Given the choice — this is not an uncommon occurrence here — I agreed to a modification in the legislation, reluctantly.

    I wasn't negotiating with myself here. I wasn't changing my own amendment. I was changing the amendment because others were insisting upon it.


    A report in today's Wall Street Journal said Treasury Secretary Timothy Geithner and the president's chief economic adviser, Lawrence Summers, lobbied Dodd, but did not suggest specific changes.

    Geithner said today he simply voiced concerns about the legal implications of Dodd's amendment.

    It remained unclear if any cap on compensation, however written, could override legally binding contracts at AIG. It was equally unclear when the bonus storm would subside. Senate Republicans demanded hearings before any vote on that side of the Capitol.


    If we don't figure out what happened now, how do we fix or how do we prevent it from happening in the future? And maybe there are other instances that have happened.

    And so before we, you know, try to fix just the AIG bonuses, let's find out what happened, so that, if there is a fix that we can all agree on, we can agree to fix all of the situations and not just this one isolated — which may not just be an isolated incident with AIG.


    And Republican Congressmen Connie Mack and Darrell Issa went further, demanding that Secretary Geithner resign.

    President Obama did not mention Geithner today at a town hall in Southern California, but he did appeal to Americans not to turn against the overall financial rescue effort.


    It's my responsibility to fix the system. But fixing the system requires us understanding that, if banks are not solvent, if they are not lending, then businesses are not going to be able to invest, we are not going to be able to create jobs, and we can be as mad as we want, but the fact of the matter is, we've got to work through this huge mess that was made in the financial system. It's going to cost some money. It's not going to be pretty. People are going to be frustrated. And we are going to get it done.


    The Federal Reserve also is the focus of questions after reports it learned of the AIG bonuses three months ago. Administration officials say the Fed did not tell Secretary Geithner until last week.

    And more bad news about companies receiving federal rescue funds: A House subcommittee reported today that 13 such firms failed to pay more than $220 million in taxes.


    If we looked at all 470 recipients, how much would they owe? Are they signing contracts knowing that they owe taxes, but thinking they will not get caught? Did then-Secretary Paulson turn a blind eye? Either way, this is shameful. It is a disgrace.


    The outrage was not limited to lawmakers today. The Service Employees International Union staged protests in Washington and other cities around the country to demonstrate anger at giving taxpayer money to AIG and other financial firms.