Swept up by a wave of populist economic anger, the US House of Representatives overwhelmingly voted Thursday to slap a 90 percent tax on bonuses at bailed-out firms like insurer AIG. The Democratic majority rallied a large swath of President Barack Obamas Republican critics as lawmakers voted 328-93 for the legislation and the furor raised the political heat on Treasury Secretary Timothy Geithner.
But the White Houses allies failed to win enough support for a non-binding resolution commending the Obama administration for its handling of American International Group, a newly potent political symbol of reckless greed. AIG, alive only thanks to 170 billion dollars in government rescue money, dished out 165 million dollars in bonuses to top executives, including some in the division blamed for putting the once mighty insurer on life support.
"We want our money back, and we want our money back now," Democratic House Speaker Nancy Pelosi said during the often bitter debate. "Heres one way to get it."
The 90 percent tax, written with AIG in mind, would apply to employees whose total annual pay exceeded 250,000 dollars at firms that received more than five billion dollars in government rescue funds. A separate Senate measure with some support from both parties would impose 35 percent excise taxes on both the firm and the recipient, though it was not clear how they would stack up on existing income taxes.
Republicans blamed Democrats for diluting a measure that would have blocked the bonus and redoubled their charges that Geithner knew, or should have known, that the awards were coming and therefore could have stopped them.
"This political circus thats going on here today with this bill is not getting to the bottom of the questions of who knew what and when did they know it," said Republican Minority Leader John Boehner. But with public anger at AIG running high, Obamas critics settled for defeating a non-binding Democratic measure praising the president for "appropriately" managing the paralysing economic crisis.
Aides on both sides said the November 2010 mid-term elections were not far from lawmakers minds, and that pessimistic forecasts made it more likely that kitchen-table issues would place high on voters agendas.
Geithner seemed to face more immediate peril, with left-of-center criticisms that he was blindly bailing out bankers and conservative calls for his resignation over failing to block the AIG awards.
And the US governments chief overseer of rescue funds known as the Troubled Asset Relief Program (TARP) announced an investigation into the AIG bonuses, including what role the US Treasury played in approving the payments. Neil Barofsky, who took over in December as the TARP special inspector-general, promised lawmakers he would "act aggressively to recover the taxpayers money" if wrongdoing were found at AIG.
The probe will cover "who knew what, how, when and why," he told lawmakers on the tax-writing House Ways and Means Committee. Barofsky said he was also co-operating with a separate investigation by New York state Attorney General Andrew Cuomo and with the Department of Justice into "options available to recover taxpayer money."
Republicans on whether Geithner knew of the impending payouts worth 165 million dollars when he approved an extra 30 billion dollars in bailout money for AIG this month, Barofsky replied he would find out. "The audit that I announced in my opening statement will have the answer to that question, whether he knew," the inspector-general said.
AIG informed the US Federal Reserve three months ago that it would pay the bonuses on March 15, but the Fed failed to notify Treasury or White House officials for months, The Washington Post reported Thursday. AIG was saved from bankruptcy with an 85-billion-dollar government lifeline in September. The bailout has since mushroomed to more than 170 billion dollars, leaving taxpayers with an 80 percent stake in the company.
The insurance giant was rescued because the US government believed its intricate web of ties with banks world-wide posed an imminent risk of financial collapse not just for the United States but globally.
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