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House Passes 90% Tax on Bailout Bonuses

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"":http://dsnews.comindex.php/home/news_story/2724 that the two GSEs plan to dole out retention bonuses for thousands of employees beginning next month.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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