March 19th, 2009 09:18 EST
Democrats Insist AIG Pay Back Bonuses Or Else
Before the Treasury infuses any more bailout funds into the former financial giant AIG, already on life support through taxpayer dollars, House and Senate Democrats issued the corporation an ultimatum: give back the money or else.
$165 million of the $170 billion AIG has received from the government is to be allocated towards AIG`s employees` bonuses, which is fueling the controversy behind the company`s unethical business practices. American International Group Inc., one of the key institutions responsible for the U.S.`s current economic meltdown, underwent a liquidity crisis in September of last year due to many of the firm`s bad investment decisions in recent history.
In a heated Congressional meeting on Tuesday, enraged Democrats mandated that if the company should keep the sum to be divided up to its workers as post-bailout bonuses, then AIG will see their money disappear as a result of exorbitant excise taxes being imposed upon it. Republicans fired back, indicting that Democrats turned a blind eye to the legislation that gave the company that freedom in the first place. According to the G.O.P, Treasury Secretary Timothy Geithner had the authority to step in and prevent such a deal from being passed and did nothing to stop it.
In response, the White House has affirmed that they remain confident of Geithner`s abilities, although they place much of the blame squarely on his shoulders.
Details have emerged on the debacle that only spark further backfire. New York Attorney General Andrew Cuomo announced that 73 individual company employees garnered bonuses upwards of $1 million or more this past Friday.
To recap, AIG is rewarding its workers who so diligently drove the company into total financial collapse only last year. And with the more than $170 billion in tax dollars, AIG repaid the tens of billions of dollars it owed local governments, and finicially-affiliated organizations.
AIG`s chief executive Edward Liddy is to appear before House Subcommittee on Wednesday to answer to his decision of fleecing taxpayers to line his employees` pockets.
This latest fiasco in the financial bailout plan is one of the reasons why both parties have been so acrimonious towards each other, more so than usual, lately. And the plan itself has caused Obama`s presidency to fall in popularity, though the Bush administration was the main author behind the plan fraught with corrupt kickbacks.
President Barack Obama knows all too well on how angry taxpayers are seeing hundreds of billions of their tax dollars being spent to keep failed financial institutions afloat while others who have made the correct business decisions pay the consequences.
A letter from a mother of two in Hillsboro, Oregon, wrote: "Wasn`t Obama suppose to fix this?" The letter`s autr, Maria Panza-Villa has been laid from three jobs since November as each of her employers went out of business.
On Capitol Hill late Tuesday afternoon, House Democrats conducted three objective-minded committees to draw up emergency legislation by the end of the week to authorize Attorney General Eric Holder to recover the substantial bonus payouts issued by companies bolstered by the bailout, AIG included.
In a declaration of moral principle, Senate Democrats mentioned that if AIG executives had a shred of integrity, then they would rescind the $165 million used for bonuses. A senior Senate Republican jokingly said they should face an honorable death by committing suicide, but later retracted his statement.
Lawmakers on both side of the aisle generally agreed that the bonuses endorsed as "retention payment" to keep valued employees with the company, still must be put back into the Treasury.
Unbecoming of the usually amicable deliberations on the Senate floor, Senate Majority Leader Harry Reid emphatically pressed: "Recipients of these bonuses will not be able to keep all of their money."
Democratic Representative from New York, Chuck Schumer mirrored the party leader`s opinion: "If you don`t return it on your own, we will do it for you."
Some Democrats voiced concern over resorting to extreme measures to ensure the money`s safe delivery. Democratic Rep.from New York and chairman on the taxwriting Ways and Means Committee, Charles Rangel felt that penalizing people by way of the tax code was wrong. He said: "It`s difficult for me to think of the code as a politcal weapon."
Others in the party felt the outlet was practical and germane due to the economic struggles the government is burdened in carrying. House Financial Services Committee Chairman Barney Frank from Mass. cited that because of the bailout, the government is now an 80 percent shareholder of the company, giving the administration full rights to reclaiming the money.
The floor`s podium was inindated by members of both parties eager to have their opinions heard. As the debate became more and more torrid, it was apparent the meeting`s purpose was as much of a screaming match as a cooperative to engage the issue.
Senator Chuck Grassley, R-Iowa, prempted the strike long before discussions hit the floor on Tuesday. Monday night, he appeared on a radio show telling AIG executives to return the money or to commit Hari Kari in authentic Japanese fashion. He recanted much of the grossly inappropriate comments about top executives all day on Tuesday.
Republicans came down hard on the Obama administration and Geithner in particular for bowing to the whims of AIG`s demands and not urging the company to cut out the bonuses sooner. Some believe as a result of his misdeeds, Geithner may be forced to resign.
Senator Richard Shelby, Republican from Alabama, said: "I don`t know if he should resign over this. He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this."
The cabinet quickly dispelled any rumors about pursuing to have Geither resign, stating that their confidence in Geithner is unwavering. Officials in the administration went on to say Geithner did everything legally possible in trying to stifle some of the money loaned to AIG.
Other leading Republicans proclaimed Democrats were to blame for putting to rest last month`s bill which would`ve made financial institutions pay taxpayers back the money used to reward employees with retention payments.
Sen. Olympia Snowe, R-Maine, who co-authored an amendment to the recent economic legislation, asserted not implementing stricter guidelines "left open an escape hatch of golden parachutes for top executives on Wall Street."
AIG has only been one offender in this financial magnet for scandal. While it`s been singled out for immoral conduct, several of the other corporations operating under the U.S. government`s financial rescue program are as at fault as they.
Merill Lynch divided $3.6 billion amongst its chief executives and highest-ranked members at the same time its sale to Bank of America Corp, another bank buoyed by federal aid, was still pending.
Morgan Stanley, one more company tethered to the government`s life line, was subject to intense scrutiny in the talks on Capitol Hill on Tuesday as well. Democratic Senator from New Jersey Robert Menendez insisted that the Treasury Secretary needs to put a stop to the company`s plans to dole out retention bonuses during their upcoming joint venture with Citigroup. Citigroup constitutes one of the firms helped by the rescue plan. In its venture, Morgan Stanley is preparing to pay its brokers a sum totaling as much as $3 billion to retain their service as a part of a nine-year loan, one spokeswoman told officials as the company`s defense to prevent anyone from working for competitors.
The New York Attorney General, who revealed that AIG paid 73 employees bonueses in excess of $1 million, said that 11 of the 73 aren`t even employed for the company anymore. When AIG employees agreed to one-year contracts netting them only a salary of $1, it was clear that the bonuses were meant to compensate the rest, Attorney General Cuomo insinuated.
Timothy Geithner pressed AIG C.E.O. Edward Liddy to renegotiate with his employees in pursuit of saving the taxpayers $165 million.
With respect to Geithner`s negotiations, Obama`s chief economic adviser, Larry Summers said: "He recognized that you can`t abrogate contracts willy-nilly, but he moved to do what could be done."
Now that the time has come to pay out the unreasonable aid, Congress is finally stepping into action though their opportunities to do so began during the Bush administration. The Democrats introduced at least three bills, with a fourth provided by the Republicans to force the Treasury Department to tighten restrictions on companys` stipulations for bailout support. Two bills brought forth in the House projected to implement a 100 percent tax on the bonuses. Meanwhile in the Senate, two senior members on the Senate Finance Committee, a Democrat and Republican, declared a lesser bill to attach a 35 percent tax on the firms giving away the bonuses with another 35 percent tax being paid by the employees being rewarded.
The I.R.S. has gained a foothold in the proceedings by withholding 25 percent from bonuses under $1 million and 35 percent from those exceeding $1 million.
Obama`s administration is currently planning ways of imposing stricter limits on how the government will spend bailout money in the future. Members from both parties requested of the president to correct these flawed conditions sooner rather than later, before any more money is needed to reinforce the economy only starting toward rebounding back.