House passes bill taxing AIG and other bonuses

[sir.real]

WASHINGTON – Acting swiftly, the Democratic-led House approved a bill Thursday to slap punishing taxes on big employee bonuses at firms bailed out by taxpayers. The bill would impose a 90 percent tax on bonuses given to employees with family incomes above $250,000 at American International Group and other companies that have received at least $5 billion in government bailout money.

"We want our money back now for the taxpayers," House Speaker Nancy Pelosi said.

Democrats led the charge in an attempt to get in front of raging public anger over the AIG bonuses, even though a provision that would have made such payouts illegal was stripped from last month's $787 billion stimulus bill by its Democratic sponsors.

The vote to tax back most of the bonuses was 328-93. Voting "yes" were 243 Democrats and 85 Republicans. It was opposed by six Democrats and 87 Republicans.

The bonuses, totaling $165 million, were paid to employees of troubled insurer AIG over the weekend, including to traders in the unit that nearly brought about the company's collapse.

The wide margin of victory came despite sharp Republican attacks calling the legislation a ploy to paper over Obama administration missteps.

Minority Leader John Boehner, R-Ohio, said the bill was "a political circus" to divert attention from why the administration and congressional Democrats had not done more to block the bonuses.

However, although a number of Republicans first cast "no" votes, the political appeal of the legislation apparently won the day. In the closing moments of the roll call there was a heavy GOP migration from the "no" column to the "yes" side before the final vote was called.

Democratic leaders rushed the bill to the floor under a procedure that requires a two-thirds majority for passage.

Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, said he expected local and state governments to take the remaining 10 percent of the bonuses, nullifying the payouts.

Rangel said the bill would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money.

A competing bill is gaining support in the Senate that would impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them. The taxes would apply to all companies receiving government bailout money, but they are clearly geared toward AIG.

In the House, a nonbinding resolution to express "the sense of Congress that the president is appropriately exercising all of the authorities granted by Congress" to deal with economic crisis didn't fare as well as the vote to tax the bonuses. The vote on that measure was 255-160, short of the required two thirds margin.

A tax expert said there is plenty of precedent for levying punitive taxes on behavior that lawmakers find objectionable. Robert Willens, a corporate tax lawyer in New York, cited the steep excise taxes levied on money paid to firms to keep them from launching hostile takeover bids, known as "greenmail."

"You can write very narrowly tailored laws," Willens said. "And they can do it for bonuses already paid."

The bill passed as controversy swirled around the disclosure that, while Democrats and Republicans were both railing about the AIG bonuses, Democrats were also responsible for removing a provision, originally contained in stimulus legislation, to ban such bonuses.

Senate Finance Committee Chairman Chris Dodd, D-Conn., said Wednesday his staff agreed to requests from the administration to delete the executive pay provision that would have applied retroactively to recipients of federal aid.

However, Dodd said he was not aware of any AIG bonuses at the time the change was made.

President Barack Obama, who took office just under two months ago, told reporters Wednesday that his administration was not responsible for a lack of federal supervision of AIG that preceded the company's demise.

But Obama added, "The buck stops with me."

___

The bill is HR 1586.


source: Yahoo News (http://news.yahoo.com/s/ap/20090319/ap_on_go_co/aig_outrage)

[timmyruckus]

nice

[mikemcgrath]

hmm, anyone else think congress is reacting so over the top about this to cover something else up? i wonder... how about they stop their automatic pay raises while they're at it. NO?! whaaa??

[Bucho]

no, i don't think this is a cover up, but yes, i think their flagrant desire to constantly give themselves pay raises is fucking atrocious.

[Tonic]

hmm, anyone else think congress is reacting so over the top about this to cover something else up? i wonder... how about they stop their automatic pay raises while they're at it. NO?! whaaa??

theres always two sides to the coin

[traci_dub]

hmm, anyone else think congress is reacting so over the top about this to cover something else up? i wonder... how about they stop their automatic pay raises while they're at it. NO?! whaaa??

outside it being unconstitutional to target a specific group to tax, fucking with guaranteed bonuses bound by contract is a great way to get yourself sued or at the very least lose the talent in your company.

They're punishing 100% of the bonuses when only 5% are to blame for the problem. I'm guaranteed an 8% bonus annually. If my company allowed that bonus to get fucked with I'd be out the door before days end... would walk down to a headhunter and have another job by the end of the week that doesn't have congress breathing down their neck.

So lets tax them 90% and save a few million, watch all their talent leave, and guarantee that AIG fails and lose billions on our nations investment in AIG. Sounds like a plan to me.

This is just a ploy to appease retards who don't understand how corporate finance works and drum up support. If this passes into law AIG will be dead within the year and our country will lose 20 times what these bonuses would have cost.

[djephex]

i would agree with you, except these bonuses were obtained thru loop-holes, and the fact that AIG is over 80% owned by the american tax payer means that this company is not a private corporation anymore. so basicly all those millions they were snatching thru loophole politics were our tax dollars. im glad they got owned. one loophole countered by another. and it is sickening that congress is getting so much dough. congress needs the same 4 year term cap that the presidents have. that might settle out alot of the corruption goin on in there.

[traci_dub]

i would agree with you, except these bonuses were obtained thru loop-holes, and the fact that AIG is over 80% owned by the american tax payer means that this company is not a private corporation anymore. so basicly all those millions they were snatching thru loophole politics were our tax dollars. im glad they got owned. one loophole countered by another. and it is sickening that congress is getting so much dough. congress needs the same 4 year term cap that the presidents have. that might settle out alot of the corruption goin on in there.

What do you mean loopholes? AIG's problem was accounting and stock misrepresentation in response to their financial problems. Most of the people receiving bonuses had performance bonuses built into their contracts whose benchmarks they met. The people at AIG are getting bonuses because when they were hired it was in their contracts to have an annual bonus.

It doesn't matter who owns AIG now when america bought out AIG they bought the applicable contracts. The democrats nixxed a plan to restructure employee contracts when the bailout was being written out of fear that the employees would leave and rightfully so. The only reason this is even being brought up again is because there was public outcry.

Most people are fucking retards and think they can strongarm talented people. They'll just leave and go get new jobs and AIG will be stuck with fuck all to rebuilt it. Joe blow college dropout making $30k a year may be outraged but they're too stupid to realize that the people they're playing chicken with don't have an employment problem. They'll leave AIG, take their ivy league degrees, and go get a job paying just as much, with a decent bonus elsewhere and let the american government and joe blow keep their bonuses and go fuck themselves with it.

[djephex]

What do you mean loopholes? AIG's problem was accounting and stock misrepresentation in response to their financial problems. Most of the people receiving bonuses had performance bonuses built into their contracts whose benchmarks they met. The people at AIG are getting bonuses because when they were hired it was in their contracts to have an annual bonus.

It doesn't matter who owns AIG now when america bought out AIG they bought the applicable contracts. The democrats nixxed a plan to restructure employee contracts when the bailout was being written out of fear that the employees would leave and rightfully so. The only reason this is even being brought up again is because there was public outcry.

Most people are fucking retards and think they can strongarm talented people. They'll just leave and go get new jobs and AIG will be stuck with fuck all to rebuilt it. Joe blow college dropout making $30k a year may be outraged but they're too stupid to realize that the people they're playing chicken with don't have an employment problem. They'll leave AIG, take their ivy league degrees, and go get a job paying just as much, with a decent bonus elsewhere and let the american government and joe blow keep their bonuses and go fuck themselves with it.

their company flopped. if aig dosnt pony up the bonuses out of their private account, then those ivy league guys have no one to hate but aig. tax money shouldnt be used to pay of corporate contracts. i will agree it sux for them, being as they are getting screwed out of their bonus, but thats not the rest of the country's problem.

[traci_dub]

their company flopped. if aig dosnt pony up the bonuses out of their private account, then those ivy league guys have no one to hate but aig. tax money shouldnt be used to pay of corporate contracts. i will agree it sux for them, being as they are getting screwed out of their bonus, but thats not the rest of the country's problem.

AIG is a publicly traded company and has been since the late 60's. I'm not sure where you got the notion that they were a private company.

Back to my point. The people who work at AIG are no longer contractually obligated to work there if they do not receive these bonuses or if their bonuses are hindered in result of the companies internal practices.

The american public is stupid. They want AIG to be "back to normal" but don't want to treat things as normal. AIG were just a normal so-so insurance company until they started insuring subprime loans. It made them absolutely rich until the banks took advantage and started giving subprime loans out to anyone and everyone.

AIG is never going to go back to that practice. Period. Therefor they will never be back to normal unless AIG makes up for that large amount of revenue they had from doing subprime insurance. That requires talented people hanging around and putting some effort into the company.

That isn't going to happen when people are fucking with their money. If you're asking them to feel guilty for doing what they're told to do or feel guilty because their company fucked up you're kidding yourself.

[sir.real]

AIG is a publicly traded company and has been since the late 60's. I'm not sure where you got the notion that they were a private company.

Back to my point. The people who work at AIG are no longer contractually obligated to work there if they do not receive these bonuses or if their bonuses are hindered in result of the companies internal practices.

The american public is stupid. They want AIG to be "back to normal" but don't want to treat things as normal. AIG were just a normal so-so insurance company until they started insuring subprime loans. It made them absolutely rich until the banks took advantage and started giving subprime loans out to anyone and everyone.

AIG is never going to go back to that practice. Period. Therefor they will never be back to normal unless AIG makes up for that large amount of revenue they had from doing subprime insurance. That requires talented people hanging around and putting some effort into the company.

That isn't going to happen when people are fucking with their money. If you're asking them to feel guilty for doing what they're told to do or feel guilty because their company fucked up you're kidding yourself.

i'll agree with you to an extent. if they are obligated to pay the bonuses, then sell off some assets or renegotiate how they are going to pay the bonuses (stock options (HAH), fruit baskets, whatever), but it should NOT be done with money provided to bailout the company and then just let the company fold.

it was not meant to fill the pockets of the executives to ease the pressure of searching for a job in a sector they helped collapse.

they may walk if no bonus paid, but that certainly doesn't mean they'll find another company to pick them up after all this fanfare.

[djephex]

AIG is a publicly traded company and has been since the late 60's. I'm not sure where you got the notion that they were a private company.

Back to my point. The people who work at AIG are no longer contractually obligated to work there if they do not receive these bonuses or if their bonuses are hindered in result of the companies internal practices.

The american public is stupid. They want AIG to be "back to normal" but don't want to treat things as normal. AIG were just a normal so-so insurance company until they started insuring subprime loans. It made them absolutely rich until the banks took advantage and started giving subprime loans out to anyone and everyone.

AIG is never going to go back to that practice. Period. Therefor they will never be back to normal unless AIG makes up for that large amount of revenue they had from doing subprime insurance. That requires talented people hanging around and putting some effort into the company.

That isn't going to happen when people are fucking with their money. If you're asking them to feel guilty for doing what they're told to do or feel guilty because their company fucked up you're kidding yourself.

i dont care if they make it or not. they made high risk decisions, and, as high risk decisions often wind up, it blew up in their faces. i want to say that i disagree with this whole bail-out plan entirely. i think that because we live in a capitalist society, that when you own a company, and you make bad chocies, and your company fails, thats the way it is. i dont think they should feel guilty or anything. id be pissed.

[traci_dub]

they may walk if no bonus paid, but that certainly doesn't mean they'll find another company to pick them up after all this fanfare.

90% of them would have jobs by the end of the week.

Talented, aggressive, confident people don't have employment problems in any economy.

*note im not talking about joe cubicle.... joe cubicle isn't getting a bonus anywho. I'm talking about middle management and upward.

[traci_dub]

i dont care if they make it or not. they made high risk decisions, and, as high risk decisions often wind up, it blew up in their faces. i want to say that i disagree with this whole bail-out plan entirely. i think that because we live in a capitalist society, that when you own a company, and you make bad chocies, and your company fails, thats the way it is. i dont think they should feel guilty or anything. id be pissed.

you don't care if AIG makes it? You do realize that if AIG isn't around to pay the insurance on all those busted subprime loans that the banking crisis goes from "bad" to "holy fuck entire economic structure of america collapses" ?

Not trying to shit on you bro but I don't think you have any clue about what AIG does or how important the AIG bailout is/was. There are a metric shit ton of banks that are barely hanging out even post bailout and are relying on AIG paying their insured loans.

[DJPrato]

Congress and this government are tossing boulders in their glass house. Any given pork project on the hundreds of pages of ammended appropriations in the current budget or the last bailout legislation dwarfs the amount of these bonuses.

This is merely the oveture of the witch hunt against private industry that is coming. Now it's bonuses at a company we've bailed out. A month from now it'll be bonuses at companies that get no government money. Anything to cast those that create jobs and wealth as villans. Simply by pointing out the corruption of a few and implying that it's practiced by all. Perhaps we apply the same lense to the daily exposure of tax corruption found in our elected officials.

Those who agree that the blame of our recession lies only with private enterprise (rather than government intrusion) and that our private sector job creators should bear the brunt of the cost of social engineering need to visit an unemployment line to see the results of their philosophy.

[sir.real]

more craziness:

Former AIG head denies he started exec bonuses (http://news.yahoo.com/s/ap/20090320/ap_on_bi_ge/aig)

WASHINGTON – Former AIG chief executive officer Hank Greenberg said the company under his leadership never had the kind of retention bonus system that has subjected it to withering criticism.

"When I was there, nobody had a contract with the company, including me," Greenberg said in a nationally broadcast interview Friday. "If you didn't do the job, you didn't deserve to be there. We had a bonus plan based on performance."

Greenberg's interview was broadcast on CBS's "The Early Show" a day after the Democratic-led House approved a bill that would impose punitive taxes on big employee bonuses from AIG and other firms bailed out by taxpayers.

"We want our money back and we want our money back now for the taxpayers," declared House Speaker Nancy Pelosi, D-Calif.

The bonuses, totaling $165 million, were paid to employees of the troubled insurer, including to traders in the financial unit that nearly caused the company's collapse.

"Mr. Greenberg is again trying to re-write history in order to distance himself from the Financial Products group he personally created and oversaw," AIG spokesman Mark Herr said in an e-mail Friday. "The fact is that, under his watch, guaranteed compensation arrangements for (Financial Products group) employees were put in place."

On Wednesday, the current chairman and CEO of AIG, Edward Liddy, told Congress under oath that his predecessor was responsible for the financial problems the company now is experiencing, saying mistakes had been made on a scale few could have imagined.

[sir.real]

holy sh*t!

looks like this is going to be in the news for a while:

A.I.G. Sues U.S. for Return of $306 Million in Tax Payments (http://www.nytimes.com/2009/03/20/business/20aig.html?_r=2)

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.’s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.

The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.

[djephex]

you don't care if AIG makes it? You do realize that if AIG isn't around to pay the insurance on all those busted subprime loans that the banking crisis goes from "bad" to "holy fuck entire economic structure of america collapses" ?

Not trying to shit on you bro but I don't think you have any clue about what AIG does or how important the AIG bailout is/was. There are a metric shit ton of banks that are barely hanging out even post bailout and are relying on AIG paying their insured loans.

i understand that. its sad that our economy is resting on the shoulders of people who carelessly take risks driven by greed with other peoples money. but although it would be a holy shit economic collapse, i believe that sometimes you gotta hit the bottom to fix things. whos to say all this dosent happen again real soon? the companys responsible for said collapse need to die off so that new companys with better leadership can arise. i know this sounds all holy soapbox and shit, but thats the way it needs to pan out i believe. these people who are causing this mess need to be removed. the bail outs are going to keep those same people who caused this mess in a position to get even more filthy and who knows..

[traci_dub]

i understand that. its sad that our economy is resting on the shoulders of people who carelessly take risks driven by greed with other peoples money. but although it would be a holy shit economic collapse, i believe that sometimes you gotta hit the bottom to fix things. whos to say all this dosent happen again real soon? the companys responsible for said collapse need to die off so that new companys with better leadership can arise. i know this sounds all holy soapbox and shit, but thats the way it needs to pan out i believe. these people who are causing this mess need to be removed. the bail outs are going to keep those same people who caused this mess in a position to get even more filthy and who knows..

I think you're unaware of how bad things would be. If AIG failed, within months every bank in the US would fail and we'd be in a situation worse than the great depression. Given that was have the FDIC now it would put such a strain on the US government that it would take close to 25-30 years to recover. The fallout would be felt literally for the next hundred years.

AIG isnt some off-wallstreet bullshit company. They're one of the biggest public companies in the world. Up there with bank of america and walmart. I think Forbes put AIG in the top 10 last year while microsoft was in the 50's if that gives you any idea.

This isn't like if McDonalds was failing and we said "let them fail, we'll just go eat burger king and the wealth would be redistributed". AIG is one of the most important companies in the worlds infrastructure that exists.

[traci_dub]

holy sh*t!

looks like this is going to be in the news for a while:

A.I.G. Sues U.S. for Return of $306 Million in Tax Payments (http://www.nytimes.com/2009/03/20/business/20aig.html?_r=2)

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.’s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.

The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.

Selective taxing is unconstitutional. This will be taken to the supreme court and be overturned and end up costing the US government about as much as the original bonuses would.

[djephex]

I think you're unaware of how bad things would be. If AIG failed, within months every bank in the US would fail and we'd be in a situation worse than the great depression. Given that was have the FDIC now it would put such a strain on the US government that it would take close to 25-30 years to recover. The fallout would be felt literally for the next hundred years.

AIG isnt some off-wallstreet bullshit company. They're one of the biggest public companies in the world. Up there with bank of america and walmart. I think Forbes put AIG in the top 10 last year while microsoft was in the 50's if that gives you any idea.

This isn't like if McDonalds was failing and we said "let them fail, we'll just go eat burger king and the wealth would be redistributed". AIG is one of the most important companies in the worlds infrastructure that exists.

(devils advocate here)

so the ansewer is to prop up the company that absolutely failed, and keep them as one of the worlds strongest entity? is this simply a "bad roll" a fluke that they happened to go from bang to bust overnight?

[sir.real]

as traci suggested...
AIG employee quits at 'betrayal' (http://news.bbc.co.uk/2/hi/business/7964250.stm)

A top executive at troubled insurer AIG has resigned, citing "betrayal" by AIG and "unfair persecution" by elected US officials.

Jake DeSantis, an executive vice-president, criticised chief executive Edward Liddy for paying bonuses, which he then called "distasteful".

In a letter published in the New York Times, he also said he would donate his entire bonus to charity.

Bonuses paid to executives of AIG have caused widespread outrage in the US.

Mr DeSantis, who worked in the insurer's financial products division, said after 11 years of service to AIG, he could "no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so".

'Betrayed'

"We in the financial products division unit have been betrayed by AIG and are being unfairly persecuted by elected officials," he added.

....


AIG: BONUS TIMELINE

14 March: Documents show AIG promised to pay $220m in retention bonuses. $55m was paid in December and $165m by March 15
17 March: President Barack Obama says he is outraged by the bonuses
18 March: AIG chairman calls on staff to repay at least half their bonuses
19 March: US lawmakers vote in favour of a bill to levy a 90% tax on big bonuses from firms bailed out by taxpayers
23 March: Nine of the 10 top executives who received bonuses agree to return them


more here (http://news.bbc.co.uk/2/hi/business/7964250.stm)

[The Spanish Armada]

Its simple, the govt is trying to save face instead of owning up to its own bad... when they gave AIG the money in the first place they could've done it on the provision (that was finially written out of the TARP deal for AIG) that said funds could not of been used for bonuses... the Gov't screwed up because they left the door wide open for AIG to spend it as they saw fit...

The whole problem with the bail out is lack of oversight and monitoring.. the final quarter of 08 and Bush's last days they were just throwing money at the problem... literally. and now the Gov't basicially wants to be an indian giver and take it back...

the public can be mad all they want, AIG got that TARP monies before any oversight had really been created for the bail out. Now cause everyones pissed the gov't has to save face... even tho Traci Dub is right and most of the workers are contract employees that have a legal binding contract to be paid x amount of dollars as long as they meet the requirements...

It was top exec at AIG that decided to use that bail out funds to fund the bonuses but nothing about the bail out he was given said he couldn't... now maybe it wasn't the best moral decision but according to wht the govt gave them it wasn't wrong, legally...

I don't know why everyone is so surprised I mean seriously when was the last time you came across a moral corporation.

[Diga_Delay]

I don't know why everyone is so surprised I mean seriously when was the last time you came across a moral corporation.

Or government.
I think that says it all right there.