The US House of Representatives has passed a bill on Thursday to slap 90-per cent tax on employee bonuses at AIG and other companies that were bailed out by tax payers money; however, the bill was blocked by Republicans in the Senate.
"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," said senator Jon Kyl, Arizona.
"Frankly, I think that's how we got into the current mess," he added.
House Democratic leaders unveiled the bill as the CEO of AIG, which has received $182 billion in bailout money, testified about $165 million in bonuses paid out in the past week to about 400 employees in its financial products division. (See: Failed AIG's bonuses to employees draw flak).
The bill was designed to recoup some of the bonuses.
Earlier, the House voted 328-93, receiving the two-thirds majority required to pass the controversial bill.
House speaker Nancy Pelosi said, "We want our money back and we want our money back now for the taxpayers."
President Barack Obama also welcomed the result of the House vote.
"Now this legislation moves to the Senate, and I look forward to receiving a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated," Obama said.
House minority leader John Boehner, described the legislation as "crap," saying, "This is nothing more than an attempt for everyone to cover their butt up here."
The House measure aims to levy a 90-per cent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money.
The taxes would apply to all companies receiving government bailout money, including mortgage giants Fannie Mae and Freddie Mac, but the current move was clearly aimed at AIG.
It, however, excludes community banks and other smaller companies that have received less bailout money
The swiftly written bill is designed to reclaim the majority of the money paid out to AIG's 400-strong Financial Products team, members of which were largely responsible for the company's near-downfall last September as a result of dealing in risky, debt-laden investments.
In fact, the remaining 10 per cent of the bonus money may also not remain in the recipients' hands. "We figured that the local and state governments would take care of the other 10 per cent," said Representative Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee
"We figured that the local and state governments would take care of the other 10 per cent," said Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee.
Senate majority leader Harry Reid tried to pass a Senate version to recoup the bonuses by unanimous consent, but Kyl asked for more time to review the legislation.
A spokesman for Reid said the Senate will try to get to the measure next week, before lawmakers head out of town for a two-week Easter recess.
Meanwhile, AIG CEO, Edward Liddy, told a House subcommittee on Wednesday that he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 per cent," he added.
"Mistakes were made at AIG on a scale that few could have imagined possible," he said. (See: AIG CEO Edward Liddy: the man America loves to hate).
Probe into bonus begins
Treasury Secretary Timothy Geithner has been under fire since news of the bonuses became public.
He said that the government would deduct the bonuses from government funds due to be paid to the insurer.
But Liddy, who took over AIG in September, told a Congressional committee that the Federal Reserve knew in November of the bonus payments to executives. He said he spoke regularly with the Fed, expecting them to pass on the details to Treasury officials.
Neil Barofsky, the special inspector general, entrusted with an investigation into AIG bonus payments, told Congress that he would look specifically at the Treasury's role in this issue.
Barofsky said he would "act aggressively to recover the taxpayer's money" if there was any evidence that something wrong was done to approve the bonuses.
He said that information he had seen showed that the Treasury and AIG discussed the bonuses in October as part of aid negotiations.
In a separate move, AIG gave details of bonus recipients in investigation by New York's top legal officer, who is trying to determine whether banks broke securities laws.
Bank of America is also expected to hand over the names of the 200 highest bonus earners in 2008 at Merrill Lynch, which it took over last year.