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White House Calls Bonuses a Late Surprise
Some Democrats expressed concerns about the tax approach. House Majority Leader Steny H. Hoyer (Md.) told reporters that he worried about running afoul of the Constitution's equal-protection clause, which forbids laws that treat certain groups differently. For now, Hoyer advocated a course of action that centered on a campaign of public pressure to persuade the AIG executives to surrender the bonuses.
House Ways and Means Committee Chairman Charles B. Rangel (N.Y.) also raised doubts about the tax idea. "It's difficult for me to think of the code as a political weapon," he told reporters outside his office. "Is this an indictment or a bill?"
Although anti-Wall Street sentiment is high on Capitol Hill, AIG has earned special wrath because of the force of its collapse. The company took huge risks with its investments in credit default swaps, an unregulated market that imploded in the credit crisis, and has received more bailout money than any other firm.
The executive bonuses, guaranteed through employment contracts that had been made public to government officials earlier, were offered as a way to lure or keep top talent to help restore AIG's financial condition, company officials said. Recipients worked for the financial products division, the unit at the center of the firm's collapse. But when news of the payments surfaced over the weekend, lawmakers turned to the Obama administration, demanding that it attempt to recoup at least some of the money.
In addition to the $165 million paid to division employees, including 11 who have left the company, an additional $230 million in bonus payments are scheduled to be made next year, according to Senate Democratic leaders.
On Monday, Obama expressed his unhappiness with the bonuses and directed government lawyers to review the company's contracts to determine whether provisions guaranteeing the payments could be overturned. Last week, the administration persuaded the company to restructure some of the payments, and AIG's top seven executives had agreed earlier to forgo their bonuses through this year.
Yesterday, Gibbs said Obama is open to the idea of a special tax on the bonuses, along with other options that lawmakers are floating, including legal action against AIG. "Obviously, the president is committed to working as quickly as possible with Congress to find ways to recoup this money," Gibbs said.
Aides continued to insist that the president and his team are doing everything possible to recover the money used to pay the AIG bonuses, while arguing that the law is stacked against their efforts. Gibbs called the efforts by the president and Geithner "extraordinary actions" taken to "protect the American taxpayers in accordance with all that we could do."
But Senate Majority Leader Harry M. Reid (D-Nev.) said yesterday that the legislative branch of government may be better equipped to do the job. "We as a Congress are not defenseless," he said. "We can also do things."