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Senate Republicans Stall Vote On AIG

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The Associated Press

Published: March 21, 2009

WASHINGTON - Senate Republicans are drawing out a flap that has made the Obama administration squirm, applying the brakes to Democrats' attempts to quickly tax away most of the bonuses at troubled insurance giant AIG and other bailed-out companies.

Sen. Jon Kyl, the Republicans' vote counter, blocked Democratic efforts Thursday evening to bring up the Senate version of the tax bill to recoup most of the $165 million paid out by American International Group last weekend and other bonuses in 2009. The House swiftly approved its version of the bill earlier in the day.

By rushing, Kyl said, Democrats were letting populist outrage trump informed decision-making in the Senate, which is supposed to be insulated from the pressures of public passion.

"I don't believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences," Kyl said on the Senate floor. "Frankly, I think that's how we got into the current mess."
Senate Democrats said they will try again next week to take up the tax bill and hope to complete it before April 4, when Congress leaves for a two-week spring break. Combining the disparate House and Senate versions of the bill might have to wait until after the recess.

Republican reluctance also appeals largely to a key constituency that traditionally finds regulation anathema: Wall Street.

Robert Willens, a corporate tax lawyer in New York, said the Senate bonus tax bill would allow bailout beneficiaries to negotiate higher salaries with employees to compensate for lost bonuses. The Senate bill authorizes the Treasury to issue regulations preventing firms from masking bonus payments as salaries, but it does not prevent firms from handing out raises.

"If the vast majority of bonuses become fixed salaries that would harm the institutions because they would have higher fixed costs," Willens said, "what happens if the bank suffers through a poor year? It has all these fixed obligations they have to meet. That's the beauty of the bonuses."

In practical terms, too, Senate Republican leaders do not know where members of their caucus stand on the measures, particularly the Senate bonus limits bill co-sponsored by Republican Sen. Charles Grassley of Iowa, GOP officials said Friday.

"I think the outrage is so obvious that we need to pass the legislation to send a clear message to corporate America," Grassley said.

OTHER DEVELOPMENTS

Goldman Sachs Group: The Wall Street powerhouse switched to offense Friday, contending that the $13 billion payment from bailed-out American International Group was fully justified and good for taxpayers.

Goldman Chief Financial Officer David Viniar said his company simply was trying to protect its shareholders, which include taxpayers after the company received $10 billion in financial rescue money.

AIG Sues IRS: As AIG takes billions of dollars from the federal government to stay afloat, it is suing the government for millions more. The big insurer is trying to recover $306.1 million in taxes, interest and penalties from the Internal Revenue Service. Among other things, AIG is contesting an IRS determination in 2008 that the company improperly claimed $61.9 million in tax credits associated with complex international transactions.

Connecticut Subpoenas: Connecticut's attorney general and the state Legislature's Banks Committee on Friday subpoenaed AIG CEO Edward Liddy and 13 employees from the company's Wilton, Conn., office who reportedly live in New York's Connecticut suburbs and benefited from the $165 million in bonuses that outraged the nation this week.

The lawmakers are demanding the 14 appear at a banks committee hearing Thursday in Hartford, Conn., to answer questions about the financial awards, which were funded using bailout money.

Liddy has said Connecticut labor law compelled AIG to pay the bonuses.

Ex-AIG Chief Speaks: Former AIG CEO Hank Greenberg said that under his leadership the company never had the kind of retention bonus system that has subjected it to withering criticism.

"When I was there, nobody had a contract with the company, including me," Greenberg said in a nationally broadcast interview Friday. "If you didn't do the job, you didn't deserve to be there. We had a bonus plan based on performance."

Greenberg's interview was broadcast on CBS' "The Early Show" a day after the Democratic-led House approved a bill that would impose punitive taxes on big employee bonuses from AIG and other firms bailed out by taxpayers.

A wire report

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