Democrats Seek To Douse Furor Over AIG Bonuses House members and senators offer proposals targeted at recovering at least some of the $165 million in bonuses going to employees of the firm, which has received $170 billion in bailout funds.
NPR logo Democrats Seek To Douse Furor Over AIG Bonuses

Democrats Seek To Douse Furor Over AIG Bonuses

Congressional Democrats sought Tuesday to douse taxpayer outrage by promising to get a refund of some or all of the bonuses paid to executives of insurance giant American International Group, which has received $170 billion in bailout funds.

Proposals from both the House and Senate to recover at least some of the $165 million came a day after President Obama expressed outrage over the matter. On Tuesday, the president directed Treasury Secretary Timothy Geithner to see if there was a way to reverse the AIG bonuses.

New York Attorney General Andrew Cuomo said Tuesday that AIG paid $1 million or more in bonuses to 73 employees, including 11 who no longer work for the company.

In the Senate, Finance Committee Chairman Max Baucus (D-MT) suggested imposing an excise tax on the AIG bonuses.

"What is the highest excise tax we can impose that will stand up in court?" Baucus asked. "Let's find out what it is."

His remarks came as House Democrats tried to outdo one another on similar proposals.

Michigan Democrat Gary Peters introduced a bill that would slap a 60 percent surtax on bonuses that exceed $10,000 at any company "which the U.S. government has a 79 percent or greater equity stake in. ... Currently, AIG is the only company that meets this threshold," according to a statement.

Meanwhile, Reps. Steve Israel (D-NY) and Tim Ryan (D-OH) introduced a bill that would that would tax at 100 percent any bonuses above $100,000 paid by companies that have received federal bailout money.

Ryan called his proposal "a wake-up call that the days of arrogance and greed on Wall Street are coming to an end. We will use any means necessary."

The Internal Revenue Service currently withholds 25 percent from bonuses of less than $1 million and 35 percent for bonuses of more than $1 million.

The flurry of congressional activity follows growing outrage from both parties over the bonuses, paid to AIG staffers months after the Bush administration initiated a bailout to save AIG from a collapse that threatened to take down other high-profile financial institutions.

Despite the bailout funds, AIG reported this month a fourth-quarter loss of $61.7 billion — the largest corporate loss in history.

The top Republican on the Senate Banking Committee, Richard Shelby of Alabama, questioned why Geithner didn't try to head off the AIG bonuses. Shelby stopped short of calling for Geithner's resignation.

"I don't know if he should resign over this. He works for the president of the United States," Shelby said. "I can tell you that this is just another example of where he seems to be out of the loop."

Shelby's comments followed incendiary remarks to Cedar Rapids, Iowa, radio station WMT by Iowa Sen. Charles Grassley, who called for AIG executives to make a Japanese-style corporate exit and "come before the American people and take that deep bow and say 'I'm sorry,' and then either do one of two things — resign, or go commit suicide."

Grassley spokesman Casey Mills later said the Republican senator wasn't calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.

Obama, speaking in Washington on Tuesday, referred to the "shenanigans" on Wall Street.

"Such activity ... leads to the illusion of prosperity and, as we're finding out, it hurts us all in the end," he said.

Appearing with the chairmen of the congressional budget committees, Obama again asked Congress to pass his $3.6 trillion budget, saying it was an "economic blueprint for the future."

The country can no longer afford "an economy based on reckless spending and spending beyond our means," he said.

Cuomo issued subpoenas on Monday for the names of AIG employees who got bonuses amid an investigation of whether the payments are fraudulent under state law because they were promised when the company knew it wouldn't have the money to cover them.

The attorney general sent a letter on Tuesday to Rep. Barney Frank, the chairman of the House Committee on Financial Services, calling for a hearing on Wednesday to discuss the bonuses.

"Last week, 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. Something is deeply wrong with this outcome," Cuomo said in the letter.

The top bonus paid was more than $6.4 million, and the top seven received more than $4 million each.

AIG and some federal regulators have said the company was obligated by contract to make the payments.

NPR wire services contributed to this report