Compelled by the AIG bonus scandal making headlines this week, on Thursday, the U.S. House of Representatives voted 328 to 93 to institute a 90 percent tax on bonuses paid by any bank or financial institution that owes the government more than $5 billion in federal bailout money.
While some are questioning the legality of a retroactive 90 percent levy imposed after the fact, “The New York Times”:http://www.nytimes.com reported that lawmakers on both sides of the aisle said the House’s tax on bonuses – which applies to traders, executives and bankers earning more than $250,000 – was the quickest way to show angry taxpayers that Congress intends to recoup the money. Though the Times said, even backers of the measure agree it is an extraordinary step.

Some regulators have also expressed concern that the move might send some banks on a premature, quick exit from the bailout program and cause others to opt not to participate in any future rescue plans, essentially subverting the administration’s efforts to prop up the nation’s financial system.
The Senate is expected to deliberate a similar bonus tax next week, but any final action could be slowed due to some strong differences from the House version. Senators are seeking to tax bonuses at companies that received as little as $100 million in federal assistance, but want to enforce a lower rate than the House’s 90 percent.
President Obama issued a statement expressing his support of the legislation and urging Congress to render a “final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated.”
According to a tally by The New York Times of bailout recipients, employees at 11 institutions — including Goldman Sachs, Bank of America, Citigroup, Wells Fargo, and JPMorgan Chase — would face restrictions immediately.
House Ways and Means Committee Chairman Charles Rangel (D-New York) said the measure would also affect mortgage giants Fannie Mae and Freddie Mac, who received their own separate bailout that doesn’t technically fall under the government’s $700 billion Troubled Asset Relief Program (TARP). It was reported earlier this week that the two GSEs plan to dole out retention bonuses for thousands of employees beginning next month.