This was a vote on a motion to suspend the House rules and pass H.R. 1586, which imposed a 90% tax on bonuses given to AIG executives that were paid after the government had “bailed out” the company with hundreds of billions of federal dollars. The news about these bonuses had generated a bipartisan protest. Rep. Rangel (D-NY), chairman of the tax-writing House Ways and Means Committee, led the effort in support of the legislation. He explained that “we're not trying to punish anybody . . . Rewards are subjective, but you don't do it with taxpayers' money. . . .” Rangel said the AIG officials do not “deserve to have these bonuses at taxpayer expense.” He noted that the way the bill was being handled, with the House rules being suspended, was “an extraordinary procedure”, but added “this is an extraordinary situation . . . (that) calls for an extraordinary response to it.”
A motion to suspend the rules and pass a bill is used for legislation that the leadership deems to be not very controversial. There is a limited time period for debate. Amendments cannot be offered. A two thirds vote is required to approve the motion and pass a bill, rather than the usual majority.
Rep. Pingree (D-ME), speaking in support H.R. 1586 during a previous procedural debate relating to the measure, had said “people across the country are rightly outraged by the egregious nature of the AIG bonuses. It is unconscionable for AIG to pay out $165 million in bonuses to the same top executives who mismanaged the company to the point of failure . . . Families and businesses . . . are struggling to make ends meet and stay in their homes. . . Meanwhile, on Wall Street, we see executives who seem to think they live by a different set of rules . . . .”
The Republican minority also expressed support for imposing a heavy tax on the bonuses. However, many Republicans raised questions about how the bonuses were originally permitted. House Minority Leader Boehner (R-OH), referring to the previously-passed economic stimulus package, said “in that bill was . . . this one sentence that made it clear that someone knew that these AIG bonuses were about to be paid, and they didn't want them stopped. So somehow in the dark of night, this one sentence was added to the bill so that AIG would pay these bonuses to their executives. I'm wondering where did the language come from. Who wrote it? . . . (D)o we have to have this political charade of bringing this bill out here? I don't think so.”
The motion carried by a vote of 328-93. Two hundred and forty-three Democrats and eighty-five Republicans voted “aye”. Eighty-seven Republicans and six Democrats voted “nay”. As a result, the House suspended its usual rules, and passed and sent on to the Senate the bill imposing a 90% tax on bonuses paid to AIG executives.
The Middle-Class Position:
Middle Class Supports. Taxpayer bailout funds should be used first to prevent a collapse of the financial system and next to make the financial system work for current middle-class Americans by addressing the housing crisis and increasing the availability of loans. Under no circumstances should taxpayer funds pay exorbitant executive bonuses. The tax on bonuses imposed by H.R.1586 provides taxpayers with a measure of accountability by recovering taxpayer funds that are misused by financial institutions whose very existence is largely predicated on government assistance. The tax cannot excuse the government’s initial failure to limit executive compensation at firms propped up by taxpayers. However, the bill will protect middle-class taxpayers by holding firms accountable when they use public money inappropriately for bonuses.
As difficulties for middle-class Americans worsened at the end of 2008, Congress prioritized the country’s financial sector instead of struggling homeowners and the growing ranks of the unemployed. Legislators rushed passage of the Emergency Economic Stabilization Act (EESA), arguing that a failure to shore up the financial system would cause great pain throughout the economy. In exchange, they promised strict oversight and accountability for the $700 billion of taxpayer money that would be funneled to the very banks and financial institutions responsible for the current crisis. But strong measures to ensure appropriate use of taxpayer funds were not included in EESA. Despite a majority government stake and commitment of $183 billion of government funds, American International Group paid executives bonuses unthinkable to the vast majority of working Americans. Similar compensation payments are planned for executives of the housing finance companies Fannie Mae and Freddie Mac, which are also under government control.
From the Experts:
AIG now claims that it had no [legal] choice but to pay [the bonuses]. However, had the federal government not bailed out AIG with billions in taxpayer funds, the firm likely would have gone bankrupt, and surely no payments would have been made out of the plan. My Office has reviewed the legal opinion that AIG obtained from its own counsel, and it is not at all clear that these lawyers even considered the argument that it is only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money. – Andrew Cuomo, Attorney General of the State of New York, March 17, 2009
What have we learned thus far? Even in a crisis such as we are experiencing, transparency, accountability and a strategy with clearly delineated goals are necessary to maintain public confidence and the confidence of the capital markets. – Elizabeth Warren, Chair of the TARP Congressional Oversight Panel, February 24, 2009
Beyond this Bill:
H.R.1586 should be unnecessary. Congress had ample opportunity to ensure that inappropriate bonus payments were not paid to employees of firms supported by taxpayer dollars. Indeed, in practice the legislation only recaptures taxpayer money, which itself expends additional IRS resources and occupies time better spent by Congress addressing the housing crisis, health care reform, and climate change. The type of ad hoc, retroactive legislation characterized not only by H.R.1586, but by the Emergency Economic Stabilization Act, calls into question Congress’s commitment to smart, long-term, sustainable investment and to real accountability with consequences for inappropriate behavior. The economic crisis demands flexibility and creative solutions to unexpected challenges. However, payment of bonuses was not only foreseeable, but legislation to prevent it was proposed. Congress must redouble its efforts to provide the accountability H.R.1586 offers before the middle-class taxpayer is put at risk.
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Injustice Index Facts
Total amount of federal assistance authorized for AIG, according the Government Accountability Office, in dollars: 182,500,000,000
Minimum amount of bonuses distributed to employees of AIG’s Financial Products Subsidiary, the unit principally responsible for the firm’s collapse, in dollars: 165,000,000
Percent ownership stake in Fannie Mae, Freddie Mac, and AIG held by the United States government, respectively: 79.9, 79.9, 77.9
Value of assets received for every $100 the Treasury Department spent on the ten largest TARP investments in 2008, in dollars: 66
Value of securities received by Berkshire Hathaway for each $100 it invested in Goldman Sachs in September of 2008, in dollars: 110
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