In response to the growing ire over the $165 million in bonuses paid out to AIG, Sen. Christopher Dodd (D-CT) has suggested that taxing the compensation might be the answer. The idea is that it would help the government recover some of the money paid out to the executives.
AIG has received $173 billion in bailout money in the last six months, and continues to report massive losses. Yet, in the midst of the crisis, AIG paid out huge bonuses, citing contractual obligations. The American public was not pleased with the decision, prompting calls and emails to Senate officials. Dodd echoed the anger of taxpayers, saying, “This is another outrageous example of executives — including those whose decisions were responsible for the problems that caused AIG’s collapse — enriching themselves at the expense of taxpayers. Dodd further noted that executives at other companies that received bailout funds have volunteered to forgo bonuses but AIG did not.
President Obama said he will attempt to block the bonuses for AIG. The president said he has asked Treasury Secretary Geithner to “pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”
Since AIG is not voluntarily agreeing to forego bonuses, the House Financial Services Committee is working to find a way to force AIG to renegotiate the bonuses. This could prove to be fruitless since the contracts were negotiated before the TARP bill was approved. Even worse, under Treasury Secretary Paulson, money was authorized to be distributed to AIG before TARP was even approved.
Congressional officials, however, don’t believe the timing should matter. They claim that this latest action is a breach of public trust and should be fixed immediately. AIG claims that its dirty scumbaggy hands are tied.
One thing is for certain: this issue won’t go away any time soon. Whether AIG gets hit by subpoenas (as in New York), is prohibited from receipt of US funds or whether executives find themselves literally paying for their bonuses in the way of excise taxes, some resolution will be demanded by taxpayers. It is, after all, our money.
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