WASHINGTON: The White House said using tax law to pry bonuses from bailed-out company executives is "a dangerous way to go" and a Republican senator on Sunday advised against the mob mentality that has Congress "grabbing its pitchforks and charging up the hill" in pursuit of the cash.
While acknowledging public outrage over $165 million in bonuses paid to a financial firm that just months earlier had turned to taxpayers for aid, the administration's economic advisers said President Barack Obama wouldn't "govern out of anger."
Obama's economic team has to deal with a plan backed by the House of Representatives that would tax American International Group Inc. executives 90 percent of bonuses paid this year.
The president, they added, did not embrace the populist legislation.
Rep. Barney Frank, the Massachusetts Democrat who heads the powerful House banking committee, supported the legislation but said Washington should consider more steps, including suing AIG to recoup the money.
The government has an 80 percent equity stake in the insurance giant, a position Frank said should be used "to assert our rights."
The White House and Senate Democrats, including Senate banking chairman Kent Conrad, urged restraint, instead hoping executives would voluntarily return their bonuses.
Vice President Joe Biden's economic adviser, Jared Bernstein, criticized the AIG tax plan as it headed to the Senate, where it was likely to be modified with bipartisan backing.
"I think the president would be concerned that this bill may have some problems in going too far - the House bill may go too far in terms of some - some legal issues, constitutional validity, using the tax code to surgically punish a small group,"
Bernstein said. "That may be a dangerous way to go."
Populist anger came to a head last week when the Obama administration went on the defensive against AIG's bonuses.
It was a distraction for the administration as it sought support for Obama's ambitious $3.6 trillion budget and a defense for Geithner, for whom Wall Street's woes have become his chief task.
White House economic adviser Austen Goolsbee said Sunday that Obama understands the anger and that the easiest thing would be for AIG executives to return the bonuses.
"The president's also been clear we don't want to govern out of anger. He's going to look at what comes out of the House, what comes out of the Senate, see what ideas we have," Goolsbee said.
Republicans and Senate Democrats seemed to line up with the president's policy team.
"People are disgusted and outraged, as they should be," said Republican Sen. Judd Gregg of New Hampshire.
"But let's not overreact in a way that basically has the Congress grabbing its pitchforks, and charging up the hill, and abusing what is a core authority of a government, which is the authority to tax its people."
The bailed-out insurance giant paid bonuses totaling $165 million to employees, including traders in the Financial Products unit that nearly took the company and the U.S. financial system to the brink of collapse.
AIG has received $182.5 billion in federal bailout money and is now 80 percent government-owned.
Populist anger led the House to pass a bill that would impose a 90 percent tax on bonuses given to employees with family incomes above $250,000 at AIG and other companies that have received at least $5 billion in government bailout money.
It would apply to any such bonuses issued since Dec. 31.
On Saturday, a busload of activists representing working- and middle-class families paid visits to the lavish homes of AIG executives in Connecticut to protest the bonuses awarded by the struggling insurance company.
About 40 protesters sought to urge AIG executives who received a portion of the $165 million in bonuses to do more to help families.
American International Group Inc. has said it was contractually obligated to give the retention bonuses, payments designed to keep valued employees from quitting, to people in its financial products unit, based in Wilton, Connecticut.
AIG chairman Edward Liddy has urged any executive who received more than $100,000 in bonus payments to return at least half.
He told a House subcommittee last week that some of the executives have "already stepped forward and returned 100 percent."
AIG has argued that retention bonuses are crucial to pulling the company out of its crisis.
Without the bonuses, the company says, top employees who best understand AIG's business would leave.
"We think $165 million could be used in a more appropriate way to keep people in their homes, create more jobs and health care," said protester Emeline Bravo-Blackport, a gardener.
The company, in response to the protests, said all its employees were "working very hard to pay back the government and help the U.S. economy recover."
"The people working at AIG today are part of the solution, not part of the problem," company spokeswoman Christina Pretto said in an e-mailed statement.
The group also protested at the office of AIG's financial products division in Wilton, where they waved signs and chanted, "Money for the needy, not for the greedy!"
There were no arrests.
Bernstein spoke on ABC television's "This Week." Goolsbee appeared on CBS' "Face the Nation." Gregg appeared on CNN's "State of the Union."
Source: TheStar
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