WASHINGTON -Sprinting to get ahead of the public backlash against bonuses paid to American Insurance Group employees, members of Congress vowed yesterday to pass legislation taxing nearly all of the money unless the employees return it.
In a rare display of bipartisanship, Democrats and Republicans denounced the insurance giant for paying retention bonuses to employees who created and sold the risky financial derivatives that prompted a government bailout.
At least three bills have been introduced in the House this week seeking to place an excise tax of 95 percent to 100 percent on the $165 million in bonuses paid to about 400 employees of AIG's Financial Products division.
House Speaker and California Democrat Nancy Pelosi said legislation could be considered by the end of the week.
Senate Finance Committee Chairman Max Baucus of Montana was drafting similar legislation slapping large excise taxes on companies and employees when bonuses are paid by any firm receiving government bailout funds. Senate Majority Leader Harry Reid predicted it would pass overwhelmingly within days if the AIG bonuses were not returned.
Reid joined 12 other Senate Democrats in writing to AIG chief executive Edward M. Liddy yesterday demanding that the bonus money be repaid. Lawmakers used the threat of tax legislation to force the issue, something they are likely to repeat today during a scheduled appearance by Liddy at a hearing.
"Mr. Liddy, I urge you to fix this mess, because, let me tell you something - we are all fed up. And if you don't fix it, we will," said Sen. Charles E. Schumer, a New York Democrat.
Schumer also had a message for the people who received the bonuses: "If you don't return it on your own, we will do it for you." The outrage was fueled as additional details of the bonuses emerged yesterday. The top seven bonus recipients were awarded more than $4 million each, with the largest totaling more than $6.4 million, according to New York Attorney General Andrew M. Cuomo.
Twenty-two people received more than $2 million each, and 73 received more than $1 million.
There was broad agreement in Congress that the issue had to be addressed at a time when many Americans are struggling to hold on to their homes and jobs because of a financial crisis that AIG and other huge financial institutions helped precipitate.
Democrats, in particular, worried that the controversy would weaken voters' confidence in Washington's ability to manage the economy - let alone embark on the ambitious health and energy policy changes sought by President Barack Obama.
"A lot of these bonuses are more than my constituents make in a lifetime," said Sen. Amy Klobuchar, a Minnesota Democrat.
Democrats tended to blame corporate greed. Republicans harshly criticized Treasury Secretary Timothy F. Geithner - although they stopped short of calling for his resignation.
Geithner approved the bonuses last weekend after determining that they were contractual obligations by AIG that could prompt lawsuits if not paid. His decision came less than two weeks after federal officials agreed to extend AIG an additional $30 billion line of credit on top of the $150 billion in bailout funds it already had sunk into the company.