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Lawmakers Talk Tough On AIG Bonuses

RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep. A huge political problem of the financial bailout is finally catching up with it. It's a problem that's been there since the start: Federal money is going to big companies and wealthy people.

MONTAGNE: Today, that becomes a very personal problem for Edward Liddy. He's the chief executive appointed to clean up the mess at AIG, the big insurance company. He will try to explain to Congress why AIG accepted billions in federal rescue money, then paid $165 million in bonuses.

INSKEEP: In a moment, we'll ask if the anger over the payments could limit President Obama's options for dealing with the crisis. We begin with NPR's David Welna.

DAVID WELNA: With the public seething over AIG's bonuses, Republicans in Congress smell political opportunity. Here's Missouri's Kit Bond yesterday on the Senate floor blaming the whole mess on President Obama's new treasury secretary.

Senator KIT BOND (Republican, Missouri): There is a rat hole, and we have thrown $170 billion down it. At the same time, the Treasury Secretary Geithner should have and could have ensured that taxpayer dollars wouldn't be used to pay these bonuses, but he didn't. This is another example, I regret to say, of the secretary's failed leadership.

WELNA: Last night, Treasury Secretary Timothy Geithner sent a letter to congressional leaders saying AIG would have to repay the government the $165 million it's paying in bonuses, and that that amount would be deducted from the next bailout payment being made to AIG. Still, Senate GOP leader Mitch McConnell said Geithner could have acted sooner.

Senator MITCH MCCONNELL (Republican, Kentucky; Senate Minority Leader): This is an outrage, and this administration could have and should have - through the process of providing for them another $30 billion two weeks ago, just two weeks ago - prevented this from happening.

WELNA: So while congressional Republicans focus on the AIG funds paid out on the Obama administration's watch, their Democratic colleagues are floating schemes to get that money back. Here's Senate Majority Leader Harry Reid.

Senator HARRY REID (Democrat, Nevada; Senate Majority Leader): I think where we are is in a position where these bonuses that AIG paid their employees should be returned. If not, we'll have the opportunity in the next few days to pass legislation, which I think will pass overwhelmingly.

WELNA: Reid and a handful of other Senate Democrats sent a letter yesterday to AIG chief Liddy, who is testifying today before a House Financial Services panel. In it, they told him to either renegotiate the contracts that called for the employee bonuses or face paying an excise tax on those bonuses of more than 90 percent. Minnesota Democrat Amy Klobuchar also signed that letter.

Senator AMY KLOBUCHAR (Democrat, Minnesota): They may be laughing all the way to the bank right now, but if AIG can't or won't fix this problem, these people will soon be crying all the way to the tax office.

WELNA: Republicans had little to say about what's being called the bonus baby tax. But because those bonuses are mostly for AIG employees in London, it's not clear how much they'd be affected by such a tax. And because the US government now owns 79 percent of AIG, it would, in effect, be largely taxing itself. The chairman of the House Financial Services Committee, Democrat Barney Frank, said the huge share of AIG owned by the U.S. is the key for recovering those bonus payments.

Representative BARNEY FRANK (Democrat, Massachusetts; Chairman, House Financial Services Committee): You begin by asserting your rights of ownership. And I do think asserting our rights of ownership strengthens the legal case. I think we should be suing to get those bonuses back, not as the government that gave money to this private entity, but as the owner, saying, you know what? You got bonuses that you didn't deserve, and we want them back on the merits.

WELNA: Frank said he expected the AIG bonus fight would eventually have to be settled in court. But Iowa's Charles Grassley, who's the top Republican on the Senate Finance Committee, insisted there's another way to reign in such bonuses. He told an Iowa radio station Monday that AIG executives ought to follow the example of disgraced Japanese executives and resign or commit suicide. Grassley later insisted he'd been speaking rhetorically.

Senator CHARLES GRASSLEY (Republican, Iowa): And why it got attention yesterday, I don't know. But I do know this, that corporate America needs an ethic like they have in Japan where corporate executives take responsibility for what they're doing and apologize to the people of Japan. We don't have that in this country, and we ought to have it.

WELNA: Grassley indicated he, too, may support a heavy tax on AIG's bonuses. But he also said Congress must respect what he called the constitutional right to contract.

David Welna, NPR News, the Capitol. Transcript provided by NPR, Copyright NPR.

David Welna
David Welna is NPR's national security correspondent.
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