* Bills in Congress to tax bonuses target AIG
* Pelosi hopes for legislation on tax this week or next
* Grassley recants comment about AIG executive suicides
(Adds Baucus-Grassley proposal)
By Kevin Drawbaugh
WASHINGTON, March 17 Outraged U.S. lawmakers
moved on Tuesday toward slapping a heavy tax on millions of
dollars in executive bonuses at bailed-out insurer American
International Group Inc. (AIG.N)
House of Representatives Speaker Nancy Pelosi hoped for
legislation within days to recover the bonuses from AIG, a
giant that once stood astride the financial system but is now
surviving on a federal rescue worth up to $180 billion.
AIG did not return calls and e-mails seeking comment.
The AIG affair is sure to aggravate public anger over the
bailouts for big business and sap support for the new Obama
administration's efforts to stabilize the financial system and
pull the economy out of recession. [ID:nN16519446]
With one senator remarking that top AIG managers might even
consider suicide, senators proposed a special tax on $165
million in bonuses pledged to dozens of executives at what was
once the world's largest insurer.
The House is making its own efforts to recoup the money.
Pelosi told reporters several committees have been working on
AIG legislation that the House could act on quickly.
Other options could be enlisting the U.S. attorney general
to recover excessive pay at companies getting government aid
and clamping down on bonuses at such companies.
Senate Democratic Leader Harry Reid said the AIG bonuses
should be returned. Otherwise, he said, Congress will have an
opportunity over the next few days to consider legislation that
he thought would pass overwhelmingly.
AIG will send its chief executive officer, Edward Liddy, to
Capitol Hill on Wednesday to testify before the powerful House
Financial Services Committee. [ID:nN17374038]
Representative Barney Frank, chairman of that panel, said
AIG should be sued "to get those bonuses back."
AIG was due to pay bonuses last Sunday to employees of its
financial products unit, which made bad bets on toxic mortgages
and credit default swaps that sent the company to its knees.
'THE COUNTRY IS ANGRY'
Several lawmakers introduced tax bills likely to worry
other businesses taking part in the government's many financial
Democratic Representative Gary Peters' bill, for instance,
would put a 60 percent tax on bonuses over $10,000 at any
company in which the government has a 79 percent or greater
equity stake. It now holds about 80 percent of AIG.
The special tax would be in addition to the top 35 percent
income tax rate plus state and local taxes, making it possible
to recover 100 percent of the bonuses, Peters said.
"Currently, AIG is the only company that meets this
threshold," he said in a statement. "The legislation I'm
proposing will get taxpayers their money back.
Max Baucus, the Democratic chairman of the Senate Finance
Committee, and Chuck Grassley, the panel's top Republican,
proposed a 70 percent tax on bonuses for executives at
companies getting money from the $700 billion financial bailout
The proposal would require the companies to pay a 35
percent excise tax, with the other 35 percent to be paid by the
bonus recipient. The tax would apply to any company receiving
federal bailout money, including mortgage giants Fannie Mae and
Freddie Mac, Senate aides said.
The legislation is aimed mostly at AIG and the tax would be
retroactive to Jan. 1, 2009.
"The country is angry and I am angry," Baucus said.
"Companies that shouldn't be paying bonuses are ... and it's
got to stop. The tax code is one way to do it."
Grassley said in a radio interview on Monday he would feel
better if AIG's top managers were to "take that deep bow and
say 'I'm sorry' and then either do one of two things: resign or
go commit suicide."
On Tuesday, he stepped back.
"What I'm expressing here obviously is not that I want
people to commit suicide," Grassley said. "But I do feel very
strongly that we have not had statements of apology."
President Barack Obama, who took office eight weeks ago,
expressed "outrage" on Monday about the bonuses, which come as
the White House faces widening skepticism about financial
institution bailouts -- none more so than AIG.
"Obviously, the president is committed to working as
quickly as possible with Congress to find ways to recoup this
money," White House spokesman Robert Gibbs said on Tuesday.
New York Attorney General Andrew Cuomo said AIG created 73
millionaires with bonuses of $1 million or more. He has said he
will subpoena AIG for more information about the bonuses,
including the names of the recipients. [ID:nN17289615]
Senate Republican Leader Mitch McConnell pinned much of the
blame on the Obama administration, which inherited the AIG
bailout, the financial crisis and the recession from the
Republican administration of George W. Bush.
McConnell said Obama's team should not have given AIG an
additional $30 billion two weeks ago without getting assurances
that it would not be spent on bonuses.
"This administration could have and should have ...
prevented this from happening," he said.
(Additional reporting by Kim Dixon, Donna Smith, Richard
Cowan, John Poirier, David Lawder, Thomas Ferraro, Susan
Cornwell, Jeremy Pelofsky, Caren Bohan, Corbett Daly and Glenn
Somerville in Washington, and Grant McCool and Jonathan Stempel
in New York; Editing by John O'Callaghan)