House Approves 90% Tax on Bonuses After Bailouts

House Financial Services Committee members met in the Capitol Thursday to discuss taxing bonuses at some firms.

The New York Times - WASHINGTON — The House overwhelmingly approved on Thursday a near total tax on bonuses paid this year to employees of the American International Group and other firms that have accepted large amounts of federal bailout funds, rattling Wall Street as lawmakers rushed to respond to populist anger.

Despite questions about the legality of the retroactive 90 percent levy, Democrats and some Republicans said the tax on bonuses for traders, executives and bankers earning more than $250,000 was the quickest way to show angry Americans that Congress intended to recoup the extra dollars. Even backers of the measure noted it was an extraordinary step.

The House vote sent some employees into a panic about the prospect of, in effect, having to give up money they might already have spent. And it had regulators fearing it could undermine the Treasury’s efforts to stabilize the financial system if banks tried to flee the bailout program or if other firms refused to participate in coming rescue operations to protect their bonuses, some executives said.

Vikram S. Pandit, chief executive of Citigroup, lobbied against the legislation in a meeting Thursday with the Senate majority leader, Senator Harry Reid, according to an industry official.

But the rush to curb the bonuses by lawmakers, many of whom have previously been torn about limiting executive compensation, reflected Congressional anxiety about heightened public dismay over the bailout. The Senate is expected to consider a similar tax on bonuses but has some differences with the House, which could slow final action.http://www.nytimes.com/2009/03/20/business/20bailout.html

Bank Chieftains Appear Before Congress

WASHINGTON — James D’Agostino craned his neck to get a view of the Morgan Stanley chief executive John J. Mack in the hope that the Wall Street titan would be subjected to a firestorm of criticism in a reckoning before Congress.

After participating in a protest last weekend at Mr. Mack’s home in Rye, N.Y., Mr. D’Agostino said he was eager to see lawmakers “go after him. And the others, too.”

But inside the House chamber where Mr. Mack sat shoulder to shoulder with Vikram S. Pandit, Kenneth D. Lewis, and the heads of five other too-big-to-fail banks leaning on government support, lawmakers instead delivered the equivalent of a slow burn.

“There is in the country a great deal of anger about the financial institutions, including those represented here,” Barney Frank, the chairman of the House Financial Services Committee said, gazing at the row of executives. But, Mr. Frank continued, it would be impractical to scrap the entire financial system and start anew. “We have no option if we are to get credit flowing in this country other than to work with the existing institutions,” he said.

Bank of America. Citigroup. Goldman Sachs. Morgan Stanley. These are the among the banks that the public blames for creating the mess that ravaged financial markets and ripped into the economy.

They and others that have taken in billions of dollars in hard-earned taxpayer dollars are widely perceived not to be returning the favor to the nation. Some say they are curbing lending while continuing to dish out millions in executive pay. But they are also the giants of the banking world that lawmakers are counting on to haul the economy back onto its feet.

This “dilemma,” as Mr. Frank described it, led some lawmakers to walk a finer line with the bankers than had been the case with the heads of the Big Three automakers, who have also sought billions in support to shore up their teetering industry.

So, at the first hearing to call banking chiefs to account for how they have spent a collective $165 billion in taxpayer money, the pitchforks were tabled — for the most part.

“You once lived behind a one-way mirror, unaccountable to the public at large,” said Representative Paul E. Kanjorksi, a Democrat from Pennsylvania. “When you took taxpayer money you moved into a fishbowl.”

The love-hate relationship with Wall Street dates back to the days when the financial district was settled by the Dutch. But the 1930s holds the greatest echoes to today. Back then, lawmakers were looking for answers behind the 1929 stock market crash, and for years they hauled bankers into contentious hearings. http://www.nytimes.com/2009/02/12/business/12bank.html?partner=permalink&exprod=permalink

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