Watch out, you greedy AIG bonus babies – the taxman is coming to get our money back!
Lawmakers seething over AIG’s decision to hand out $165 million in bonuses to the very executives who nearly destroyed the insurance giant vowed yesterday to write new tax laws to claw the money back.
Meanwhile, with his feet held to the fire, Treasury Secretary Timothy Geithner last night wrote congressional leaders to tell them the administration would impose a “contractual commitment” on AIG – which is now 80 percent owned by the taxpayers – to pay back the amount of the bonuses.
The money would be taken off the top of its upcoming $30 billion bailout installment.
But Geithner’s letter didn’t say the individuals who got extravagant bonuses would have to return them.
The letter is not expected to keep Congressional critics from carrying out their plan to come out, guns blazing, to demand AIG’s execs pay back the bonuses out of their own pockets through the hefty new targeted tax.
The rising congressional fury came as it was revealed that 73 AIG employees – from the toxic Financial Products unit – snagged bonuses worth at least $1 million each, after taxpayers pumped in more than $170 billion to save the company.
With fury over the bonuses boiling over in every corner of the Capitol – and the White House revealing last night that Obama didn’t know about them payouts until Thursday, the day before the checks were mailed – lawmakers drew up plans to tax from 91 to 100 percent of the big payouts.
They pledged to act immediately to push the measure through Congress.
“If you don’t return it on your own, we will do it for you,” warned Sen. Charles Schumer (D-NY) in a Senate speech.
Senate Majority Leader Harry Reid (D-Nev.) called the thought of executives keeping the bonuses “repulsive” and called it a sign of “greed and corruption on Wall Street.”
“Recipients of these bonuses will not be able to keep all of their money,” he insisted.
Schumer and Reid led a group of senators who wrote AIG’s CEO, Edward Liddy, demanding he renegotiate the contracts guaranteeing the bonuses – or face Senate legislation to tax the windfalls at rates as high as 91 percent.
Reid threatened to take up the issue immediately if AIG doesn’t back down, and Speaker Nancy Pelosi said the House could take up a bill as soon as next week.
Pelosi has also asked committee heads to draft legislation to let the US attorney general recover bonuses and prohibit abuse of retention bonuses for companies taking bailout cash.
In the House, Democratic Reps. Steve Israel and Carolyn Maloney of New York unveiled separate legislation to tax bonuses of over $100,000 at a 100 percent rate for any company that accepts federal bailout cash.
Geithner was under fire from Republicans who questioned why he wasn’t able to stop the bonuses before they went out.
“We need to find out when these bonuses were approved and more than that, when they were contracted for. And who knew this?” said Sen. Richard Shelby (R-Ala.). “Did Secretary Geithner know and look the other way?
“I don’t know if he should resign over this, 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.”
White House Press Secretary Robert Gibbs said President Obama has confidence in Geithner.
One AIG bonus recipient took home a jaw-dropping $6.4 million, and one lucky AIG employee who took home $4.5 million isn’t even working there anymore, state Attorney General Andrew Cuomo revealed yesterday, declining to release the names of the employees.
In addition, 22 people took home more than $2 million and the top seven recipients pocketed more than $4 million each, Cuomo wrote to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
“AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees forcing a taxpayer bailout,” Cuomo wrote. “Something is deeply wrong with this outcome.”
Eleven of the workers who got $1 million or more in “retention” bonuses are no longer working with AIG, he disclosed.
The feds have given so much money to AIG because officials fear that with more than 70 million clients, it is “too big to fail.”
AIG’s insurance on bonds and mortgage-backed securities – such as credit-default swaps – puts it on the wrong side of many bets now that the economy has tanked and companies are going under.
If it failed to honor those commitments, the feds fear dozens of banks and financial institutions could go under and it could plunge the country into a deeper recession – and even disable the world financial system.
Also yesterday, Sen. Charles Grassley (R-Iowa) walked away from controversial comments he made Monday when he called on AIG executives to “resign or go commit suicide” because of their conduct.
Grassley told Fox News he was just referring to Japanese business culture, saying, “It would make me feel a lot better if our corporate structure would adopt that culture from Japan for the reason that I have not heard anybody apologize for running the corporation . . . into the ground.”
Rep. Charles Rangel of Harlem, the Ways and Means Committee chairman, warned yesterday of using the tax code to recoup the bonuses, saying people might think of the tax system “as a political weapon rather than a revenue raiser.”
Rangel reportedly met with members of AIG last year to discuss a multimillion donation to the Charles B. Rangel Center for Public Service, although AIG never made a contribution.