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US Congress reacts to AIG and targets Treasury Secretary

Friday, March 20th 2009 - 06:53 UTC
Full article
Nancy Pelosi: “We want our money back and we want our money back now for the taxpayers.” Nancy Pelosi: “We want our money back and we want our money back now for the taxpayers.”

US lawmakers in the House of Representatives have voted in favour of a bill to levy a 90% tax on big bonuses from firms bailed out by taxpayers.

The move follows outrage over the decision by AIG to award its employees 165 million in bonuses after taking 170 billion in aid from the government.

House Speaker Nancy Pelosi said: “We want our money back and we want our money back now for the taxpayers.”

Members of the house voted 328-93 in favour of the legislation.

Similar legislation is being considered by the US Senate, and if that too is passed, the two chambers will need to find a compromise version.

The bill targets companies that received 5 billion in taxpayer aid, and would levy a 90% tax on bonuses paid to employees with incomes above 250.000 USD.

The BBC's James Coomarasamy, in Washington, says the bill was opposed by some Republicans, who argued that the legislation diverted attention from the administration's handling of the affair.

Some Republicans have called for US Treasury Secretary Timothy Geithner to step down, our correspondent adds.

In total, 243 Democrats and 85 Republicans voted in favour of the bill, which was passed with unusual speed. It was opposed by six Democrats and 87 Republicans.

“The whole idea that they should be rewarded millions of dollars is repugnant to everything that decent people believe in,” said Charlie Rangel, the Democratic chairman of the Ways and Means Committee.

Mr Geithner has been under pressure since news of the bonuses became public.

He said that the government would deduct the bonuses from government funds due to be paid to the insurer.

President Barack Obama has also reiterated his anger at the bonus payments.

Edward Liddy, the boss of AIG, on Wednesday called the bonuses paid to executives “distasteful” and said he had asked some recipients to return at least half of what they had been paid.

“Mistakes were made at AIG on a scale that few could have imagined possible,” he said.

But Mr Liddy, who took over AIG in September, told a Congressional committee that the Federal Reserve knew in November of the bonus payments to executives. He said he spoke regularly with the Fed, expecting them to pass on the details to Treasury officials.

Probe launched

An investigation into AIG bonus payments was launched earlier on Thursday.

Neil Barofsky, the special inspector general, told Congress he would look specifically at the Treasury's role.

Mr Barofsky said he would “act aggressively to recover the taxpayer's money” if there was any evidence that something wrong was done to approve the bonuses.

He said that information he had seen showed that the Treasury and AIG discussed the bonuses in October as part of aid negotiations.

Both the Treasury and Mr Liddy have said they had received advice that said they were legally bound to make the bonus payment

AIG was saved from bankruptcy with an 85 billion USD bn lifeline last September.

The government has since pumped billions more into the troubled insurer, which reported a loss of 61.7 billion for the last three months of 2008, the biggest quarterly loss in corporate history. Reports suggest that AIG is considering selling its New York headquarters and a nearby office block.

Categories: Economy, United States.

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