Senate Tackles AIG Bonus Bill After House Approves Its Version

The Senate's first attempt to pass a bill designed to recoup some $165 million in bonuses paid to AIG was blocked Thursday by Sen. Jon Kyl, R-Ariz.

Senate Majority Leader Harry Reid tried to pass a Senate version to recoup the bonuses by unanimous consent but Kyl said not so fast, arguing more time was needed to review the legislation which was introduced earlier Thursday.

"I don't believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences," he said.

"Frankly, I think that's how we got into the current mess," he added.

A spokesman for Reid said the Senate will try to get to the measure next week, before lawmakers head out of town for a two-week Easter recess.

House lawmakers passed their version Thursday to slap heavy taxes on employee bonuses at AIG and at other companies that have received large bailout packages from the government.

The House voted 328-93, receiving the two-thirds majority required to pass despite vocal opposition by Republicans and some Democrats.

The House measure will levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money.

"We figured that the local and state governments would take care of the other 10 percent," said Rep. Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee.

The bill applies to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money, Rangel said.

House Democratic leaders unveiled the bill as the head of embattled American International Group Inc., which has received $182 billion in bailout money, testified about $165 million in bonuses paid out in the past week to about 400 employees in its Financial Products unit.

Votes on either side of the argument Thursday were fraught with political peril.

House leaders brought the bill under a special provision that requires a two-thirds vote for passage. With 421 lawmakers voting, 281 yeas were required to approve the measure.

Democrats had two reasons to rush the vote: to force the hand of skeptical Republicans and make them vote for the plan. And to set up a public relations nightmare for the GOP and potentially blame them for killing the measure if the House defeated it.

In the end, that may have forced Republicans to vote for the measure.

The Republican leadership team was split: House Minority Leader John Boehner, R-Ohio, voted no. But his whip, Rep. Eric Cantor, R-Va., and former whip Roy Blunt, R-Mo., voted yes. Democratic aides could hardly contain their glee.

"It just shows that the message that Boehner and Cantor tried to sell to their conference didn't work," one Democratic aide said.

This legislation is known as a "suspension" because it "suspends the rules" that require a simple majority to approve a bill. Typically the House can only debate suspensions on Mondays and Tuesdays.

But Democrats went out of their way to receive a special dispensation from the Rules Committee to bring up the bill Thursday in an effort to challenge Republicans to vote for the measure.

Before the vote, Democratic aides were non-committal about chances to coax Republicans to join them and get the two-thirds supermajority to approve the bill. But they were particularly happy after 85 Republicans joined 243 Democrats to approve the plan.

House Majority Leader Steny Hoyer, D-Md, predicted Wednesday the bill would pass. But Boehner, described the legislation as "crap."

"This is nothing more than an attempt for everyone to cover their butt up here," Boehner said.

Nadeam Elshami, a spokesman for House Speaker Nancy Pelosi, D-Calif., indicated that Democrats "would be dumbfounded if (Republicans) didn't vote for it."

But some Democrats, including freshmen Reps. Jim Himes, D-Conn., and Michael McMahon, D-N.Y., had planned to vote against the bill because they believed lawmakers were "rushing through" the process.

Himes and McMahon represent many Wall Street constituents in Greenwich, Conn., and Staten Island. But in the end, Himes relented and voted for the bill.

McMahon was one of only six Democrats who voted against the bill. The others were Reps. Walt Minnick, D-Idaho, Harry Mitchell, D-Ariz., Vic Snyder, D-Ark., Melissa Bean, D-Ill., and Larry Kissell, D-N.C.

Edward Liddy, who was brought in last year by the government to run AIG, told a House subcommittee Wednesday that on Tuesday, he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 percent," he added.

Lawmakers rushed to the microphones after word of the bonuses was leaked out by the government over the weekend. Bills were quickly drawn up in both the House and Senate to impose heavy new taxes on them.

The top two members of the Senate Finance Committee on Tuesday announced a bill that would impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them. The taxes would apply to all companies receiving government bailout money, but they are clearly geared toward AIG.

House Financial Services Committee Chairman Barney Frank announced Thursday the committee will consider legislation to prohibit any bonus payments by companies who have received capital investments under the TARP program and the Housing and Economic Recovery Act until these investments are repaid in full.

The legislation will be "marked-up" in the Financial Services Committee on March 24 and the full House of Representatives will be able to consider the legislation the following week.

FOX News' Chad Pergram, Trish Turner and The Associated Press contributed to this report.