Congress Threatens to Tax AIG Bonuses

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THE WHITE HOUSE -- There's a concerted campaign to collect some of the public money used to help prop up insurer American International Group or also known as AIG.

Congressional Democrats vowed today to all but strip AIG executives of their $165 million in bonuses.  

All of Washington is fuming over AIG's multi-million dollar bonuses for the employees of a firm that has received billions in taxpayer bailout funds.

"Recipients of these bonuses will not be able to keep all of their money," declared Senate Majority Leader Harry Reid, in an unusually strong threat delivered on the Senate floor.

"If you don't return it on your own we will do it for you," said Chuck Schumer of New York.

It seems everyone has an opinion about insurance giant AIG and it's not very good.

"Tell them to take a hike," said one bystander. "Tell them to go out and get a real job, and see what the real world is out there instead of getting up bonuses that taxpayers are paying them!"

The company disclosed that it's paying $165 million in bonuses after receiving $170 billion in federal rescue funds.

Can The Money Be Recovered?

With public outrage boiling over, the driving question is can the government do anything to recover the money? A question that is being raised at the White House.

"This is a corporation that finds itself in financial distress due to recklessness and greed," President Obama said.

And the same question is being raised on Capitol Hill.

"The odd thing is, we are told these are people who are being given retention bonuses," said Rep. Barney Frank D-Mass. "If they were in high school they would be getting detention not retention."

The Shame Tactic

"Come before the American people and take that deep bow and say, 'I'm sorry' and then either do one of two things: resign or commit suicide," said Sen. Chuck Grassley R- Iowa.

Later, Grassley's office said he did not mean it "literally".

Using the shame tactic, New York Attorney General Andrew Cuomo issued subpoenas to find out who received the bonuses - used to retain the very employees responsible for the company's financial problems.

"Hello! Where are they going?, asked Deborah Gordon, an employment attorney. "Plus, there are a lot of unemployed people."

Some critics say AIG can resolve the problem itself.

"I think AIG has an obligation to at least try not to pay its executives," Gordone added. "Again, double standard -- Detroit automakers."

President Obama has directed Treasury Secretary Tim Geihtner to use every legal option to block the bonuses. But there may be little he can do since the bonuses are written in legally binding contracts and agreed upon before the government took over the company last fall.

AIG -- Just One of the Administration's Problems

For now, the fallout appears to be guiding how the government should act the next time around. And that might be the strongest form of leverage the government has.

AIG has given lawmakers reason to think twice about helping out troubled financial firms, already unpopular among the public.

The Obama Administration has given strong hints that any future financial help would depend on the fate of these bonuses.

In a televised address, the President spoke out about criticism that his administration is tackling too many problems at once.

"The American people don't have the luxury of just focusing on Wall Street," Obama said. "They don't have the luxury of choosing to pay their mortgage or their medical bills. They don't get to pick between paying their kids' college tuition or saving enough money for retirement."

"They have to do all these things," the president added. "They have to confront all these problems. And as a consequence, so do we."

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CBN News
John Jessup

John Jessup

CBN News Washington Correspondent

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