Congress Hatches Plans to Snatch Back AIG Bonus Cash

Mr. Cuomo subpoenaed the information yesterday from AIG in an effort to determine whether the payments constitute fraud under state law.

He said contracts written in March 2008 guaranteed employees 100 percent of their 2007 pay for 2008, regardless of their performance.

According to the letter, the top recipient received more than $6.4 million; 22 individuals received bonuses of $2 million or more, and combined they received more than $72 million; 73 individuals received bonuses of $1 million or more; and eleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million.

In the House, Rep. Steve Israel, D-N.Y., introduced legislation to impose a 100 percent tax on the bonuses.

And, Rep. Carolyn Maloney, D-N.Y., head of the Joint Economic Committee, also said she is introducing legislation to apply a special tax to the bonuses.

In the Senate, Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee said at a hearing that he is drafting legislation to claw back "some" of the bonus money. The tax could be as high as 91 percent, sources said.

"We are looking at tax options that will reclaim the outrageous bonuses paid by AIG," Baucus said, adding that the measure will be unveiled shortly. "What's the highest excise tax we can impose that will stand up in court?"

In a statement, Rep. Israel said that, "if we can't kill the bonuses, we'll tax the bonuses."

He added that, "American families shouldn't be forced to reward these professional financial failures with extravagant bonuses that could buy fancy cars and yachts."

He said, "AIG may not like it, but since they had to come to the federal government for help, the federal government now has a say in how they spend taxpayer money."

Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, Monday had suggested some form of taxation as a means of recouping the bonuses.

He said the tax would apply only to those at AIG who have received bonuses. The provision would help the government get back the money in the form of tax revenue, he said.

Today, in a hearing on insurance regulation, Sen. Dodd said that the American people "are outraged–and I am as well."

He added that the "the chairman of the Federal Reserve has said that the government's efforts to prevent AIG from failing outright are akin to a neighbor smoking in bed and setting the house on fire.

"With these bonuses, what we are seeing is the folks responsible picking the pockets of the firefighters and stealing the hubcaps off the fire truck; it's outrageous," he added.

He also said that he wants to hear from the Federal Reserve Bank what steps are being taken to deal with the situation–"we want and expect an immediate and full briefing.

"And we also want answers regarding where the Fed had been on conditions for these types of bonuses since this rescue effort first began," he added.

Sen. Charles Grassley, R-Iowa, was even more animated. He told Cedar Rapids, Iowa, radio station WMT, that "I would suggest the first thing that would make me feel a little better toward them [AIG executives] is if they follow the Japanese example and come before the American people and take that deep bow and say, 'I am sorry,' and then either do one of two things: resign or go commit suicide." he said.

"And in the case of the Japanese, they usually commit suicide," he added.

Later today, he apologized to reporters for his comments about suicide.

Sen. Charles Schumer, D-N.Y., demanded that the bonuses be returned–or taxed.

"They should voluntarily return them," Sen. Schumer said in a statement on the Senate floor. If they don't, we plan to tax virtually all of it."

Schumer called it "Alice in Wonderland business practices" to give bonuses to executives at a firm that lost nearly $100 billion last year and had to be rescued with $170 billion in taxpayer money.

"It boggles the mind," he said.