March 24th, 2009
05:11 AM ET
5 years ago

Senate Democrats suddenly slow drive to tax AIG bonuses

WASHINGTON (CNN) – The populist wave that swept Capitol Hill last week against controversial bonuses paid to AIG executives stalled Monday after the White House and several key senators raised concerns about legislation to heavily tax the bonus payments.

"In light of concerns raised by President Obama and Senate Republicans we need additional time to discuss next steps," Jim Manley, a spokesman for Senate Majority Leader Harry Reid of Nevada said late Monday.

In response to the criticism, Senate Finance Committee Chairman Max
Baucus, D-Montana, who angrily denounced the AIG bonuses last week, said he's been talking to White House officials and to other senators about changing the bill he introduced just Friday.

"I want to hear what senators have to say. A lot are weighing in now with different ideas," Baucus said. "Some are tax. Some are regulatory. But they're still all addressing bonuses."

Baucus said he does not know when his bill - which appeared to be on a fast track last week - will be considered by the Senate.

On Sunday, President Barack Obama said on the CBS News program "60 Minutes" that, "You don't want to be passing laws that are just targeting a handful of individuals."

Democratic sources told CNN that statement was a subtle public warning that was privately delivered to Senate Democrats in a much more direct way.

Sources said top Obama officials argued behind the scenes against
eliminating the bonuses with a stiff tax because it might not be constitutional and because it might deter companies from participating in the government's rescue attempt of the banking industry.

But sources also say some Democrats are reluctant to bend to White House pressure after seeing the public beating Sen. Chris Dodd, D-Connecticut, took last week after acknowledging he agreed to an administration request to change the bonus restriction.

Asked about the president's concerns, the principal Republican supporter of the tax legislation criticized Obama.

"We wouldn't be using the tax code if he had been on top of things and kept the bonuses from going out in the first place," said Sen. Chuck Grassley, R- Iowa. "I think the special interests the president says he's been fighting are raising their ugly head and he's submitting to them."


Filed under: AIG
soundoff (42 Responses)
  1. Tom in Delaware

    Might be unconstitutional???

    Only to those Americans who haven't learned how to read....which explains why the Congress is so confused.

    Reading doesn't seem to be one of their strong suits.

    Proof: The Stimulus Bill.

    Case closed.

    March 23, 2009 11:01 pm at 11:01 pm |
  2. the rector

    Federal income tax is unconstitutional in the first place. It was foisted on the american people as a way of paying for the also unconstitutional invasion and destruction of the confederate states. Funny that when it comes to these corrupt bank ceos the constitutionality of income tax comes to the fore. The golden rule: he who has the gold makes the rules. There will be a little something extra in your check this week Mr. Pres. Way to keep your word!

    March 23, 2009 11:03 pm at 11:03 pm |
  3. wise choice

    don't target people with policies, it sets a precedent that you don't want the next dork from the GOP to follow

    March 23, 2009 11:07 pm at 11:07 pm |
  4. Don

    We don't need outrage,we need regulatory reform.

    March 23, 2009 11:42 pm at 11:42 pm |
  5. lb

    Why is congress feigning surprise by the bonuses when they were a part of the deal? Obama knew it.....why do you think he said he would not act upon it! Where's the change in Washington?

    March 23, 2009 11:52 pm at 11:52 pm |
  6. Bob

    The bill goes against the intent of the Constitution. The Congress Democrats and Republican phoney indignation on the AIG bonus issue is simply to boost their public image. They are discusting in the continuous demonstration of just how stupid they believe the American people to be.

    March 24, 2009 05:47 am at 5:47 am |
  7. independent Jim

    If the criteria for getting paid is superior performance, perhaps Congress realized they might be the next targets of the public's wrath?

    March 24, 2009 06:31 am at 6:31 am |
  8. PJ, New York Independent

    The American people need to vote as many of these 'career politicians' as we can, out of office in 2010- Dodd, Pelosi, Reid, Frank, etc.

    As voters- we all constantly complain about things not going in the right direction for our states or our whole country for that matter. Well- get rid of the career politicians then!

    All of the Obama supporters kept screaming for 'change'. Well- what about change in congress too? There should be term limits in congress- this is one of our biggest problems.

    March 24, 2009 07:00 am at 7:00 am |
  9. Cindy, PA

    It’s not hard to figure out why they stopped creating an illegal tax, the bleeding heart liberal Democrats realized they would be breaking the law and it would be used against them to remove them from office. The American people have had it with these criminals in Congress and this community organizer / social worker president that has no clue and is incompetent.

    March 24, 2009 07:33 am at 7:33 am |
  10. S Callahan

    It's interesting that only an estimate of 80 million out of 165mil can be recoupped (or hoped to be recouped) because 85 mil is 'out of the country'...............go figure!

    Charlie Rose had a great show last night with media and financial minds.....don't get too hyped up....we are still on a roller coaster but at least it is going up right now.....

    For those who did give back ...kudos to you! We may not know who you are but our Creator does (can't hide ffrom him). Thank You!

    March 24, 2009 07:50 am at 7:50 am |
  11. Brian G, Sugar Land, TX

    As much as it disgusts me that personnel in a non-performing sector of AIG received bonuses, I am more concerned about the government retroactively changing or nullifying contracts of any type as a form of punishment.

    The sanctity of a signed contract (not an illegal agreement) is part of the foundation for business and social relationships.

    If those relationships can be arbitrarily altered without demonstrating an illegality, contracts are not worth the paper they are written on.

    March 24, 2009 07:52 am at 7:52 am |
  12. bernie

    They can charge their customers hundreds in fees for a $20.00 overdraft yet they are overdrawn by trillions and get a bonus for it.
    I don't think so, it'll be one vote and veto I'll remember come next election.

    March 24, 2009 07:54 am at 7:54 am |
  13. Alfaya Lewis

    For the first time, it appears that this administration and Congress might actually slow down a second and THINK about what they are doing. It's been very nerve-wracking watching bills pushed through like crazy lately without so much as a thought to what messes they might create. Thank you for taking a breather and slowing down.

    March 24, 2009 07:54 am at 7:54 am |
  14. Georgia Gal

    I agree that something needs to be done, but I agree with those that say taxing is the way. The ideal thing would be for the people who received those bonuses to just give them back (and I realize a lot of them have). I know that it was in their contract to receive these bonuses and Congress allowed this loophole to happen, but IMO any company that is this far in debt and has received as much bailout money from the federal government as AIG has should only be spending money on what is absolutely necessary. Bonuses while very, very nice are not necessary. With regard to bonuses everyone I know does not receive a bonus if two things don't happen ... 1) if the company is not performing well, 2) the person is not deserving of a bonus. If either one of those things don't happen then everyone I know does not get a bonus and I don't see why AIG are these other companies are any different especially when they're relying on money from us, the American taxpayers to survive.

    March 24, 2009 08:13 am at 8:13 am |
  15. Ernesto

    Like children, the politician poorly shaped the original bailout and tried to go back and clean up the mess. They made a bigger mess! Using the tax code as a weapon is a terible, dangerous prescident.

    March 24, 2009 08:16 am at 8:16 am |
  16. Sue, MI

    President Obama is correct. In their rush to appear 'concerned' and 'outraged,' Congressmen on both sides proposed things that are rash and probably, illegal. Calm down folks. Looks like the guys have been shamed into returning the bonuses, and I daresay, companies will think twice about taking government money again. So this may have a positive ending with NO new legislation. Go, Obama. I love having an intelligent, reasoned man in charge.

    March 24, 2009 08:27 am at 8:27 am |
  17. A little backstep...

    But they are perfectly fine unleashing angry mobs on the handful of individuals, sounds like for the first time this administration remembered that we have a constitution!

    March 24, 2009 08:36 am at 8:36 am |
  18. Jerry

    The proverbial question...Is there honor among thieves?

    March 24, 2009 08:41 am at 8:41 am |
  19. Fair is Fair

    Sounds like political damage control to me.

    March 24, 2009 08:47 am at 8:47 am |
  20. Brian

    I got to admit, I'm a fan of this. It's not a huge issue, but Obama made it appear like he would block his congress on something, and now they're flinching a little.

    March 24, 2009 08:48 am at 8:48 am |
  21. Diane Dagenais Turbide

    The bonuses were part of a contract. The only way to resolve contracting issues is through a court i.e. a judge....a court can decide if the bonuses were deserving of payment and look at if someone got a bonus and failed to provide productive services according to the contract.

    March 24, 2009 08:52 am at 8:52 am |
  22. Moe NY

    In my opinion, the only reason AIG was bailed out is because the government employees (Congress/Senate, etc.) pension funds, 401k, etc. is managed by AIG. The government is protecting its own individual selfish interests. The government better do something about AIG (and I do not mean slap their hands) as the American people are fed up with AIG's outrageous behavior. Yes, some bonuses are being returned, but we will never recoup the taxpayers money that was sent out of our country.

    March 24, 2009 09:03 am at 9:03 am |
  23. Kevin in Ohio

    Its probably way too much to expect that any of the liberal members of Congress are changing their ways. I *do* expect they will find more ways to tax us, and tax us again and again.

    March 24, 2009 09:03 am at 9:03 am |
  24. S.B. Stein E.B. NJ

    As the president has said, we should not lash out in anger. I think that the anger we have should drive us to look at what greed and not looking at what kind of consequenses de-regulation has done. We need to correct that and understand a way forward that makes this so much harder. This may mean a review of all the auditors and investigators at the SEC so things like this banking and credit default swaps get reviewed more throughly. It should also be said that the SEC should be given enough people and resources to be able to stop people like Madoff.

    March 24, 2009 09:04 am at 9:04 am |
  25. proud army navy mom

    all the major media tried to whip the people into a frenzy over AIG and the senate and congress hastily tried to feed the beast. THIS is not the way to draft legislation based on raw emotions....that is when we make to most mistakes.

    It was a dumb idea at the time of conception and I'm glad they came to their senses. Let's learn from our mistakes

    March 24, 2009 09:14 am at 9:14 am |
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