As public and political outrage grows over $165 million AIG paid as bonuses to executives while taking billions in taxpayer dollars, an idea is germinating in Congress. If you cannot get the money back, tax the bonuses.
"It's an idea very much at the embryonic stage," said Senate Banking Committee Chairman Chris Dodd, D-Conn., "You can write a tax provision targeted specifically at 98 percent of the taxable proceeds."
Dodd said that "doesn't violate the terms of the contracts," referring to legally-binding agreements that appear to preclude government action.
Senate Finance Committee Chairman Max Baucus, D-Mont., says his staff is reviewing such a proposal. He called it a "worthy" idea but said he needs to know more about how it would work.
Dodd says this is something that "could happen fast. We could write this tomorrow."
Rep. Carolyn Maloney D-N.Y, the chair of the Joint Economic Committee, is also calling for a 100 percent tax on bonuses not related to commissions.
In a letter she distributed to fellow legislators for co-sponsorship, Maloney introduces legislation that will instruct the Treasury and the Internal Revenue Service to develop guidelines that tax at 100 percent any bonus compensation that is not directly related to a commission for any recipient of TARP funds where the government is the majority owner of the company.
"For a company that has required $170 billion in U.S. taxpayer assistance and is 80 percent owned by the United States government, this is clearly unacceptable," said Maloney.
When asked if he plans to write legislation to limit the Federal Reserve's unfettered ability to lend money without strings attached, so as to prevent the situation with AIG from happening again, Dodd would not answer directly, saying only, "We need to look at that whole debate about modernization of the system ... they've got to do a better job."
Dodd says he plans hearings into the AIG bonuses. The senator said he was told about the controversy on Thursday.