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As public outrage builds over bonuses issued by bailout recipient AIG, two senators are claiming they tried to outlaw such bonuses but were thwarted by the White House and fellow lawmakers.
Sen. Ron Wyden, Democrat of Oregon, and Sen. Olympia Snowe, Republican of Maine, say they proposed an amendment to the stimulus bill in February that would have imposed heavy penalties on bailout recipients that refused to pay back bonuses over $100,000.
Wyden made the claim during an appearance on The Rachel Maddow Show on MSNBC, and in other interviews.
"Back in early February, you and Senator Snowe added an amendment to the stimulus bill that, I think, would have prevented AIG from giving out these millions of dollars worth of bonuses," Maddow said to Wyden. "That amendment was taken out of the bill. Am I right that your amendment would have stopped what we are experiencing right now?"
"You are right," Wyden said. "And that's what's so sad about this situation. It simply didn't need to happen."
Wyden went on to predict that a similar measure would pass now that the issue has gained so much public attention.
"I think finally, we'll get it done," he said. "The tragedy is it should have been done a month ago when we had bipartisan legislation that got through the Senate and then somehow mysteriously disappeared."
In a separate interview with the Huffington Post, Wyden blamed both the White House and fellow legislators, suggesting they caved to lobbyists for Wall Street who opposed the measure.
Wyden and Snowe announced the amendment Feb. 4, proposing it be tacked onto another amendment to the American Recovery and Reinvestment Act of 2009, otherwise known as the stimulus bill.
Last year's financial rescue package, commonly known as the bailout, had "left open the escape hatch of golden parachutes for top executives on Wall Street," Snowe, a member of the Senate Finance Committee, said at the time. "This amendment insists on strong taxpayer protections and guarantees that no tax dollars be used to prop up Wall Street executives."
The amendment required companies that received government rescue funds in 2008 to repay within four months any bonuses above $100,000 or face an excise tax of 35 percent on the portion of the bonus over $100,000.
It reportedly would have raised as much as $3.2 billion, a substantial chunk of the $18.4 billion in employee bonuses paid out in 2008 by companies that received more than $274 billion of bailout funds.
Wyden pressed Treasury Secretary Timothy Geithner on the amendment at a Senate Budget Committee hearing on Feb. 11.
"Given the fact that the president, to his credit, called these bonuses shameful, and time is short, where do you stand on getting a solution to the problem of these just-paid excessive bonuses in the economic stimulus legislation?" Wyden asked.
"We've talked about that privately," Geithner said, in part, in a lengthy response. "Our staffs are working together. We'd like to work with you on how to achieve that objective."
American Banker , a trade publication, reported on Feb. 12 that the banking industry "strongly opposes" the provision, "which the banking industry hopes to scale back when the House and Senate hash out differences between the stimulus bills."
They appear to have succeeded. On Feb. 12, the Associated Press reported: "The provision was removed as House and Senate negotiators hammered out final details of the $789 billion economic stimulus legislation this week."
There is no documentation in the public record of exactly who removed the provision.
Wyden overstated the case a bit when he responded in the affirmative to Maddow's suggestion that the amendment "would have stopped what we are experiencing right now." It would not have eliminated the bonuses entirely — only that portion over $100,000 per person. And the tax that would have been imposed on companies that did not comply would have recovered just 35 percent of the excessive amount.
But Wyden can legitimately claim to have taken on the issue with gusto — well before the current outrage over AIG's bonuses. We find his claim to be Mostly True.
Associated Press, Stimulus Bill Seeks to Recover Wall Street Bonuses, Feb. 10, 2009
CBS News, Bailout Companies May Compensate Taxpayers , Feb. 11, 2009, accessed March 18, 2009
Associated Press, Congress Kills Plan to Recover Wall Street Bonuses, Feb. 12, 2009
Federal News Service, Hearing of the Senate Budget Committee, Feb. 11, 2009
Snowe.senate.gov, Snowe-Wyden Amendment Will Recover Taxpayer Dollars Paid Out as Wall Street Bonuses , Feb. 4, 2009, accessed March 18, 2009
American Banker, Legislative Update, Feb. 12, 2009
National Journal’s CongressDaily, Conference Report Includes Scaled-Back Exec. Pay Caps, Feb. 13, 2009
The Library of Congress, S. Amdt. 468, accessed March 18, 2009
The Rachel Maddow Show, transcript, March 17, 2009
Huffington Post, Wyden: My Bill Could Have Prevented AIG Mes s, March 17, 2009, accessed March 18, 2009
E-mail exchange with Tom Caiazza, spokesman for Sen. Ron Wyden, March 18, 2009
Interview with Edward Kleinbard, chief of staff of the Joint Committee on Taxation, March 18, 2009
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