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Senate Will Delay Action on Punitive Tax on Bonuses
Obama expressed similar reservations in a portion of the "60 Minutes" interview that was not broadcast. "We're going to take a look at this legislation, and I'm going to do so with two principles in mind. Number one, we've got to make sure that people aren't rewarded for failure with taxpayer money," he said. "Number two, we've got to keep our eye on the big picture and the fact that we've got to get our banking system lending again."
Obama's statement contrasted with the outrage he expressed early last week when he vowed to "pursue every legal avenue to block these bonuses." White House officials said the president is waiting to see what emerges from Congress before deciding whether to sign the measure into law.
While the Senate pauses, House Financial Services Committee Chairman Barney Frank (D-Mass.) is pushing ahead with a different proposal that his panel could approve as soon as tomorrow. The measure would forbid all retention bonuses at any bank or firm receiving TARP funding until the recipient has paid back the Treasury in full. Existing contracts that call for executives to receive six- and seven-figure retention bonuses would not be broken, but the payments would be delayed until the bank or financial firm had fully refunded the government.
In an interview Sunday on CBS's "Face the Nation," Frank expressed reservations about the tax approach. "I voted for the bill. I was not a major advocate," he said. "People are worried about taxation being used in this way. People are worried about interfering with contracts."
In the House, nearly half of Republicans, including Rep. Eric Cantor (Va.), the No. 2 GOP leader, voted in favor of the tax. But in the Senate, after a week of saying little, Republicans came out in force yesterday against the legislation.
"My view is that this bill ought to slow down and we ought to think about the ramifications of what we're doing," Senate Minority Leader Mitch McConnell (Ky.) told reporters.
Sen. Judd Gregg (R-N.H.) said the bonus tax could sabotage the administration's plan, which Geithner announced yesterday, to court private-sector investors to buy up the toxic bank assets that have paralyzed the economy.
"I would think a lot of the private-sector folks who might invest with the government are going to have second thoughts about that, unfortunately," Gregg said, noting that firms not included in the current proposals fear that they will be targeted in later bills.
One key Democratic defection was Senate Budget Committee Chairman Kent Conrad (N.D.), who said the bonus tax raised serious constitutional questions because of its narrow focus. "Do you really want to use the tax code to go after just a handful of people?" he said in an interview with MSNBC.
But Sen. Olympia J. Snowe (R-Maine), a co-sponsor of the legislation, urged her colleagues to push forward with it. "It would be a huge mistake for Congress to retreat," she said.
Staff writer Michael A. Fletcher contributed to this report.