According to Sen. Ron Wyden of OR, a modest little bill he and Olympia Snowe introduced over a month ago could have prevented the AIG bonus outrage by capping the bonuses of any institution receiving TARP funds at $100k and taxing anything over that at 35%. I fail to see what he's talking about. For those bankers making millions in salary and/or bonuses, they are already allegedly being taxed at 35%. After the various dodges that the tax code accords the ruling class, it comes out to far less, but there is nothing in Wyden's proposal that undoes any of the aformentioned dodges. Here's a modest proposal: go back to the tax code that preceded Ronald Reagan, when the top rate was 50%. Better yet, go back to the Eisenhower years, a time of great prosperity, I'm led to understand. The best off paid a marginal rate of 94%. What is particularly outrageous to me is this whole thing is that the people who pulled down these outrageous amounts of money didn't just do it in the last couple years. They have been draining the system for a decade and taking advantage of Clinton-era deregulation. If we really want to make it fair, a "Jubilee" rule would have to be temporarily imposed to claw back the ill-gotten gains of the last ten or so years. That would kick-start funding for a decent health insurance system.
On a more optimistic note, other legislators are talking about imposing even higher taxes on TARP recipients' employees who get big payoffs. It could open the door for generally fairer redistribution of wealth. Why shouldn't rich movie stars and jocks also shoulder the burden?
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(from Huffington Post)
ReplyDeleteWyden: My Bill Could Have Prevented AIG Mess
March 17, 2009 09:19 PM
Senator Ron Wyden said on Tuesday that the furor surrounding AIG's bonus payments could have been avoided had the Obama White House and members of Congress simply backed legislation that he and Sen. Olympia Snowe introduced more than a month ago.
In an interview with the Huffington Post, the Oregon Democrat noted that during the crafting of the stimulus package, he and his Republican colleague from Maine introduced a provision that would have forced bailout recipients to cap their bonuses at $100,000. Any amount paid above that would have been taxed at 35 percent. The language made it through the Senate, but during conference committee with the House, it was inexplicably removed.
"The reality is, had that legislation been passed it would have been a very strong disincentive to anybody paying out bonuses in the future," said Wyden. "Earlier, the President had denounced those bonuses that came at the end of the year. And when Senator Snowe and I said it is not enough for those in elected office to say it was wrong, that they have got to have a plan to have them pay it back, we were able to get legislation through the United States Senate. Not a single United States Senator was willing in broad daylight to stand up and oppose our bipartisan amendment... but it died in conference."
Looking back, Wyden laments the missed opportunity, saying that it remains unclear who got the language stripped -- "it didn't die by osmosis." (Feel free to send along tips on who killed the provision.)
Moreover, Wyden says frankly, the Obama administration should have been better prepared to handle what was an inevitable political train wreck.
"I will say that I talked to most of the key members of the Obama team and I was not able to convince them of the value of the amendment that I authored with Senator Snowe," he recalled. "I think it is unfortunate. I think it was an opportunity to send a careful, well-targeted message, which would have communicated how strongly the administration felt about blocking these excessive bonuses. I wasn't able to convince them."
That being said, he and Snowe have a remedy: they are reintroducing their stimulus provision as a stand-alone bill, only they are getting even stricter with bailed-out institutions. Instead of capping bonuses at $100,000, they are lowering the level to $25,000. The law would cover all recipients of taxpayer TARP money, as well as those firms -- like AIG -- which have received money outside of the Troubled Asset Relief Program. And it would deal with bonuses issued in 2008. If a company refuses to give up the bonuses, the amount that exceeded $25,000 would be taxed at 35 percent.
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"They are either going to have to pay it back or they are going to be taxed," said the Senator. "And I think that is going to be pretty hard when they are already getting taxpayer money."
The legislation, as Wyden notes, effectively accomplishes several tasks -- punishing and dissuading firms for issuing bonuses, while not invalidating labor contracts. "Some of the best lawyers around have looked at it and their judgment is that this would be a legal approach," said Wyden. In a statement from her office, Snowe estimated that had their provision remained in the stimulus, AIG would have either been forced to "return the TARP money or pay out the bonuses and incur a 35 percent tax - equating to roughly $58 million."
Today, the political landscape is quite different from the one during the stimulus debate, with an even greater wave of populist outrage directed at AIG. In that vein, it would be hard to imagine -- should Wyden and Snowe's legislation actually make it to a vote -- Senators publicly opposing it. The Obama administration, too, seems likely to back some sort of measure, having declared that it would do everything in its power to recoup the bonuses paid out by AIG and curb similar practices from happening in the future. On Tuesday, Snowe and Wyden sent a letter to Treasury Secretary Timothy Geithner, asking him to endorse their approach.
And yet, Wyden still laments the missed opportunity to have put a policy in place from the beginning. Saying that his opposition to the bailouts were based on grounds that there was not "adequate oversight and accountability with respect to preventing these kinds of abuses," he concluded that his initial fears have been confirmed.
"When folks say that money from the TARP went out the door for these kinds of bonuses, what I have been saying is, I'm not exactly surprised," he said. "It was one of the fundamental reasons why I voted against both of those major bailouts."