New Bill Would Ban All Bailout Bonuses

Rep. Barney Frank's Financial Services Committee will take up a new bill next week to ban bonuses at any companies benefiting from federal bailout funds. The legislation would amend last year's bailout bill to prohibit TARP-fund recipients from paying any type of bonus to any employee no matter what--even if the bonus is called a retention payment. The bill would also prohibit compensation that is "excessive" or not based on performance standards.

The legislation comes after a chaotic House vote on Thursday to levy a 90% tax on bonuses, and also after Sens. Ron Wyden and Olympia Snowe announced plans to introduce legislation providing a 35% tax on bonuses of more than $25,000.

Financial Services Committee spokesman Steve Adamske tells the Huffington Post that the new bill is complementary to the prior anti-bonus measures. It would add an additional layer in the burgeoning bonus prevention effort.

"We outlaw lewd and lascivious behavior," Adamske says.

The bill will be marked up in committee next Tuesday.

Comments

[Roberto31]

How can we limit the incredible greed in Congress and Senate? They gouge more and more money every year out of hard working Americans with their pick pocket greed. Who and how do we stop that? That is what is killing our economy. Americans dont have much disposable income to creat prosperity as these sorry politicians at every lever pick their pockets every time they turn around. When will these liberal control freaks decide enough is enough??

[Uchenna Oguekwe]

I heard a lot of criticism about the provision that was taken out of the stimulus bill that would have stopped these bonuses, but what I don't hear a lot about and also don't understand is why there wasn't any anti-bonus provision written in the TARP bill? You would think that the bill that was specifically design to give taxpayer money to these banks would of had something in it to protect our money from being wasted.

Also I was wondering, the loophole line that was add to the stimulus bill stating no bonuses after Feb 11, 2009, if this was never added to the bill how much difference would it have done? One of the reason's this situation is complex is because of the fact that AIG wrote up this contract to pay the bonuses in Jan. of 2008. If AIG is legally inclined to pay these bonuses, although it would be really unethical for them to do so after they got bailout money, could have the Dodd provision really stopped them from paying out the bonuses? Would AIG legally have an argument against the bill?

[staticnoise]

There are enough real assets managed properly, in America, to insure our survival we should have let the giants fail. Garnish the assest and incomes of the managers of the fail companies until the stock holders are paid their losses. a In the mean time allow them a single wide mobile home, a 5 year old Chevy/ford to get them to work, a 19" color TV no cable, still they would be living better than a good portion of the US work force. I have nothing but contempt for these thieves and the elected officials who enabled them, and make excuse for them.

[wdw505]

it will be ruled unconstitutional

[Irmanator]

The one from Thursday? Howard Fineman quoted Article 1, section 9, paragraph 3 on Countdown. Bills of attainder and ex post facto.
http://en.wikipedia.org/wiki/Article_One_of_the_United_States_Constitution#Section_9:_Limits_on_Congress

I don't know about attainder in Mr. Frank's new one. It looks like it has an ex post facto problem though.

[Brunobear]

Hellaluyah! I got one up albeit short.

[Irmanator]

"as the bishop said to the actress"

Sorry, classic english comedy bit. No offense intended.

[Brunobear]

Why? They never seem to get up?

[wishfor]

Bonuses are meted out for all kinds of reasons - mostly political. The biggest recipients are friends of the Board, the Chairman or the various bosses they report to. I have rarely seen bonuses used to reward the most worthy. We unfortunately do not live in any kind of meritocracy.

[Roberto31]

Why do you think the guys getting all of the big bonuses are the same guys who gave three times as much money to Obama as they did McCain? Because they have discovered that you can buy off these guys like Chris Dodd who got the biggest amount at $103,000 and Obama who took tens of thousands of dollars ffom these crooks on Wall Street. We need term limits to stop these Dodds and Barney Franks from getting up to Chairman of any committee. The Greed is in DC much more than Wall Streetl. Look at all the money they have taken out of your paycheck. Is that not greed? What do we get for all those salaries we pay Congress. They cannot even manage the Post Office without losing over a billion a year and constantly raising postal rates. Man look around! The Greed that is out of control is with your own congressman and Senators.

[cvenezia]

Being that "WE THE AMERICAN PEOPLE" are now the 80% share holders af AIG When is OUR next board meeting ...... I think we all should go don't you...


Also: Could "WE THE AMERICAN PEOPLE" put together a class action suit against AIG? For filing false and misleading written statements. Obtaing "OUR" federal money under false pretences.

I'm serious is there a lawyer out there?

[Irmanator]

I am not a lawyer. Urge your representative to get "say on pay" passed.

http://en.wikipedia.org/wiki/Say_on_pay

Frank got it passed in the house in 2007 but it stalled in the senate.

http://money.cnn.com/2007/04/20/news/economy/house_executive_pay/index.htm

[bigblu1993]

Chairman Frank is responding to a situation that requires a very complicated solution with a broad jackhammer that will mostly punish those bank employees who have done nothing wrong. As a Democrat, I am beginning to find some of these simple-minded pronouncements as even more discouraging than the crisis itself.

Here is the letter I wrote the House FInance Committee:

I strongly oppose the new proposed legislation that would prohibit bonuses to ALL employees of any TARP accepting institution. Not only does it add another post facto condition on TARP that your committee did not address when it should have, but it is also going to affect negatively employees of these institutions, the vast majority of which have done nothing except contribute positively to their employers.

Chairman Frank seems bent on getting his pound of flesh for the excessive bonuses paid to a vast minority of AIG, Fannie and Freddie executives. This proposed legislation, however, exacts 15.5 ounces of that flesh from workers who have done nothing wrong.

As a voting Democrat who has been so far unimpressed with this Committee's response to the crisis, I would strongly encourage the Committee to reconsider this plan.

[sloLes]

This comment is excellent. Unfortunately, a wave of booing the referee has taken hold of the crowd, and everyone is doing it. But let's also say that in many cases, people from failing companies who have made no exceptional contribution are getting bonuses as a matter of habit and privilege. And that's wrong, too!

[Lefthooker]

One of the few posters that sees it for what it is.
Why are so many here NOT holding Mr Obamas feet to the fire?the buck DOES stop there!
How can we believe that this admin will oversee all these astronomical spending programs that they voted for(apparently without even reading!) when their first'at bat' is a disastrous strikeout?
Being a myopic cheerleader for Obama is no different than those that did the same for Bush...
as for the bonuses, I'magainst them - but punishing those execs by passing draconian tax penalties in the middle of the night is FAR more frightening to me.
BTW I voted for this president...I am NOT impressed so far.

[youngat80]

The President does not control Congress, nor does he have any authority over the Congress or individual members or committees of the Congress. This does not mean that the President cannot use whatever abilities of persuasion he has to influence Congress and the American citizens to accept his overall plans and expectations to resolve the economic and financial crisis we have inherited.

These bonuses are only 1% of the money paid to AIG. Congress, President and the media ought to spend more time and effort fixing the problems of the 99%

[mjt218]

amen

[Nancy84]

In all my years of working, when we were given "profit sharing" bonuses, that was fine. There is no profit here for them to share. And, I might add.........you can be sure those bonuses are not going to the "worker bees" They are going to those who have already reaped the benefits when the market was booming. This seems to me just another way that the "Already haves, are taking the cream and the milk and leaving their stockholders and the taxpayers with an empty bottle.

Stock holders need more say in these things. A stockholder's bill of rights was brought up and shot down during Bush's administration

[staticnoise]

I agree the bill has Constitutional problems. However as I understand the bill has a very direct target.Respectfully extracting 15.5 ounces of flesh from those who performed well may not be fair, but in the future they may be more vigilant and outspoken. The innocent public are being to ask to contribute flesh, why should employees be required to do the same? Granted they are going to have chunks taken out of both butt cheeks, perhaps they will be more vigilant next time around.

[cvenezia]

What I would really like to see is all those exec's of all those bailed out firms get put on unemployment benifits the max of course. So they could feel and understand better what it's like to lay awake in bed, tossing and turning shaking,crying holding on to your wife/husband in desperation at night trying to figure out how their going to pay all their bills. The mortgage/rent, the utilities, buy food and cloth for the family, insurance, medical, And what their going to have to do with their family after they loose the house. Will they be on the street, move into a tiny apartment with a rent almost as much as their mortgate was, and still having all those other expenses. Becomming more angry, depressed, distant from their family and friends. Still making the same amount of money and having every thing getting more and more expensive no matter how they cut back, like not buying as much food, setting your heat down the 58 degrees shuting off the electricity for hours during the day, trying to scrap up enough money for the gas company so the don't shut off the gas and then charge you $100.00 to turn it back on. Falling deeper and deeper into the abyss of haveing no money and no way out..... and then .. maybe then they would know and understand the feeling of "everyone having a piece of their money but them".
Da-javu.....

[Dave27]

Which maximum? I'd say give them the Mississippi max - $210/week.

I look forward to the day when these issues are settled.

[cvenezia]

It well onlY be over when "WE THE PEOPLE" make our voices heard.....


REVOLUTION!!

DON'T FILE APRIL 15TH!!!!

[youngat80]

Evenezia -- only someone who has experienced it could write so moving an account. The tragedy is that there are a million more who have the same story to tell.
If any one of the recipients of the exorbinant bonuses was capable of understanding your plight, I believe s/he would not have accepted the bonus.
There have been a few news accounts of smaller corporations who have shared year end bonuses with the workers, but those stories are the exception.
Sleep well tonight, be refreshed to face tomorrow as you look for a glimmer of hope.

[Mikeeee]

If you haven't seen this, you need to. KO nailed it again.
http://www.msnbc.msn.com/id/3036677#29783656

[cvenezia]

Mikeee just saw that KO thing..... it just gets better every day.... a $10m office, but their savin money! ................... I'm speachless.

[QuoVadis415]

Part 2
If these people leave and there is always a demand for someone with 100’s of millions a year in sales connections by UBS, RBS, HSBC or any other foreign firm that doesn’t have a pitchfork mob after them. AIG is going to have a hard time selling these things for a good price and getting the TARP paid off. These are incredible complex products and positions, they need people in there that understand them. Now with this 90% tax, AIG is saying now they are trying to find a way to get the money to pay off TARP because the cost of these 400 people leaving would be catastrophic (and they understand catastrophic failure already).
I have a feeling AIG will being talking to every loan shark out there. This is somewhat good (private investment) but at the same time TARP was meant to provide these companies with capital backstops to prevent runs on them. TARP companies are freaking out and are now trying to find capital so they don’t have to deal with uncle Sam, but these lower capital levels are going to put us where we were in Sept/Oct. The TARP money was meant to provide some backstop to calm people down. And you get a fear for consumer credit (credit cards & auto loans) in full gear, easily we can be back where we were at in Sept/Oct with everyone questioning the banks about their capital levels.

[nomobull]

fist a lot still left second why would you want to retain or hire any of those who help create this mess

[mjt218]

Do you know how many employees these banks have? There's no way all of the employeees are responsible. If I worked at a tarp firm and had any marketable skills I'd be shopping for a new job. This bill will effectively take away almost the entire ability these firms have to incentivize their employees performance. Sounds like a great measure to help these companies fight through the toughest times in their histories.

[QuoVadis415]

Part 1
I know I'm pretty alone on here on this but I wanted to share what Wall Street is saying; I understand the outrage of the bonuses. But taxing them at 90% is going to make things much worse. The bonuses aren’t performance bonuses, they are retention bonuses. AIG has a division (AIGfinancial) that created the CDS and modeled the risk very poorly for them, they assumed that there never would be a nation wide housing collapse that would cause a squeeze in the credit markets (regardless if this was a oversight or a ineptitude, how do we resolve this) and this then caused a “run on the bank”. AIGf has about 1.6T in assets they are trying to sell and unwind. These are INCREDIBLE complex derivative contracts. They were modeled by people with PHd’s in physics and mathematics, the sales people have massive sales connections.

So AIG has said that AIGf will be dissolved but they need to sell off 1.6T in assets. All these highly educated and well connected people are going to have their jobs eliminated once their portfolios are unwound so they are getting paid to stay on to unwind their positions, hence a retention bonus. Now the total is 165million on 1.6trillion in assets, it’s a very small cost. I understand the outrage at the bonus but the better this is unwound at correct prices rather than trying to fire sell them, the sooner that the TARP loan gets repaid.

[Brunobear]

As banking professional myself, there are very few people in the banking and finance industry with the sort of insight and knowledge that your pundits suggest exist. How many of these excrutiatingly overpaid geniuses have stepped forward with the solution to the world financial crisis. I did it for Australia in its 1991 crisis, with no reward or recognition and would do the same for the same for the US. All I see in the US is everyone with their handout even at the depths of a self imposed crisis. "Thou shalt be done on earth as it is in heaven" has been modified to "Though shalt be done as it is in Hell" . All I can say is God bless those American military families who are making a low remunerated sacrifice for the sake of the free world, while these NY charlatans and foreign partisans rob the beautiful US blind.

[cvenezia]

Hey what would happen if this april 15th half the people in america didn't file the tax returns as a protest. Do you think that would send a message, and really show our feelings about how this contury is being run?

[youngat80]

As a professional tax preparer for 43 years, I think that very little would happen if half the people filed after April 15. The Feds already have your tax money that has been withheld from your wages, or prepaid with quarterly estimates. Most tax filers get a refund, in which case the deadline for filing is April 15, 2012.
A few weeks ago there was much ado being made about a tax cut for 2008. When an eligible taxpayer files his 2008 return in March or April of 2009, he should receive an additional refund -- $400. per person on the return was one amount being bandied about.
So that kind of tax protest would only enrich the Federal coffers and deplete yours.

[cvenezia]

youngat80, Thank you for explaining that. I wasn't even sure if somthing like that would even. The point I was trying to make is that "WE THE PEOPLE" REALLY need to make our voices heard in washington. To the point were they stand up ,take notice and say "these people mean business"

[Osusuki]

I'm sort of tired of seeing this issue used as a jump off point for would be tax resisters. Much of the process that led up to the financial crisis in the first place was composed of selfish people not paying their fair share of taxes anyway. If you use that as an excuse not to pay yours, are you any better that they are?

[cvenezia]

Osusuki, Thank you for explaining that. I wasn't even sure if somthing like that would even. The point I was trying to make is that "WE THE PEOPLE" REALLY need to make our voices heard in washington. To do SOMTHING to the point were washington stands up ,takes notice and says " these people mean business"

[gcw]

How about nationalizing AIG and letting the top management go. Then, make the employees of the insurance dept gov employees offering health insurance and/or health care for all Americans? Sell off or otherwise dispose of all the non-insurance so-called assets. We own it already. Why not make AIG work for us? Hmmmmm?

[Lefthooker]

They already DO work for us! What do you think the 173 bil got us?!
The problem is that our elected officials -yes ALL of them - Obama, Senate and Congress - have just proven that THEY are incapable of running the show either (big surprise).
Those bonuses should have been dealt with BEFOR the money was released...be honest, if this happened on Bushs' watch would the search (and ensuing punishment) for the enabler of this situation not be a full scale tar-and-feather witch hunt?
It would be front page of the NYT for the next 6 months...instead it will quietly slip away and be replaced by cheerleading headlines about how Congress 'stopped' the evil AIG execs.
Wake up everyone!!!

[youngat80]

The payment of Government funds received by AIG was made during Bush's watch.
Reliable news reports indicate that some of the restrictions re use of the funds were
removed before the funds were paid out.
The USA is in this mess because of the Bush administrations inefficiency.