|Sponsor||Rep. Kilroy, Mary Jo|
|Date||March 19, 2009 (111th Congress, 1st Session)|
|Staff Contact||Andy Koenig|
This resolution is expected to be considered on the House floor on Thursday, March 19, under a motion to suspend the rules, requiring a two-thirds majority vote for passage. This legislation was introduced by Representative Mary Jo Kilroy (D-OH) on March 19, 2009.
This concurrent resolution resolves that it is the sense of Congress that:
"The President is appropriately exercising all of the authorities granted by Congress under the Emergency Economic Stabilization Act of 2008, and any other Federal law, by taking all necessary actions to ensure that-
Ø "In the absence of a voluntary decision by AIG employees and executives to forego their contractual retention bonuses, AIG will repay taxpayers for the hundreds of millions of dollars the company provided to executives and employees in retention bonuses;
Ø "Going forward, companies that receive a capital infusion under title I of the Emergency Economic Stabilization Act of 2008 that the Secretary of the Treasury deems necessary to restore liquidity and stability to the financial system of the United States are prohibited from providing to executives and employees unreasonable and excessive compensation payments that are not directly tied to performance measures, such as repayment of the companies' obligations to the taxpayers, profitability of the company, adherence to appropriate risk management, and transparency and accountability to shareholders, investors, and taxpayers; and
Ø "Companies that receive a capital infusion under title I of the Emergency Economic Stabilization Act of 2008 that the Secretary of the Treasury deems necessary to restore liquidity and stability to the financial system of the United States are complying with the letter of the provisions included in the American Recovery and Reinvestment Act that strengthen executive compensation restrictions for recipients of capital infusions, such as limiting base salaries for executives to no more than $500,000 per year, banning golden parachutes, limiting bonuses for executives, requiring shareholders to approve pay packages, requiring executives to certify they are meeting the law's restrictions, requiring a companywide policy on luxury expenditures, and prohibiting compensation on the basis of excessive risks that threaten the viability of such companies, and adhering to all executive compensation guidelines the Secretary of the Treasury may establish."
The American International Group (AIG) is one of the largest insurance and financial services companies in the world. Headquartered in New York, AIG employs more than 115,000 people and operates in more than 130 countries worldwide. In September, 2008 AIG's Standard and Poor's credit rating was lowered, due, in part, to AIG's sizable investments in the debt securities known credit default swaps. With stocks tumbling and confidence that the company could survive waning, on September 16, 2008, the Federal Reserve Bank of New York, under the leadership of now -Treasury Secretary Timothy Geithner, agreed to provide AIG with $85 billion.
Over the next few months, Congress established the Troubled Asset Relief Program (TARP) to buy up toxic assets from financial institutions, and quickly pledged an additional $37.8 billion to AIG. As the mission of TARP changed to provide direct capital infusions, AIG continued to collect taxpayer assistance. To date, AIG has received or been pledged $173 billion in taxpayer funds. The federal government now controls roughly 80% of AIG stock. On February 4, 2009, President Obama announced that his administration would impose strict restrictions on bonuses and compensation paid to employees of institutions that received TARP funds, stating that "We're going to be demanding some restraint in exchange for federal aid." However, on March 15, 2009, AIG announced that it had paid $165 million in contractually obligated retention bonuses-some as large as $6 million-to 73 AIG Financial Products Group employees. The announcement has since sparked public outrage regarding the use of taxpayer assistance and led to the consideration of this legislation.
It is important to note that the Majority took affirmative action on more than one occasion to ensure that these payments could be made. The $165 million in AIG bonuses were made possible by an amendment to the "stimulus" package added during the conference committee by Sen. Chris Dodd (D-CT). The amendment stated that provisions in the TARP and "stimulus" bills that limited compensation payments would not apply to "any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009." Thus, Sen. Dodd's amendment legally required AIG to pay the bonuses because they were agreed to months prior.
The conference committee also stripped a Senate-passed provision from H.R. 1, which would have completely prevented the $165 million in AIG bonuses. The conference committee removed an amendment sponsored by Senators Olympia Snowe (R-ME) and Ron Wyden (D-OR) that would have forced any TARP recipient to repay any bonus paid in excess of $100,000, or face a 35% excise tax on any TARP funds that were not immediately paid back to the Treasury. The amendment was accepted in the Senate by voice vote. However, the Snowe-Wyden amendment was taken out before the final vote. Despite their strong rhetoric, Democrats in Congress made the AIG bonus payments possible.
While Democrats have facilitated the payment of bonuses to employees of companies that have received taxpayer assistance, Republicans have attempted to enact legislation that would restrict TARP recipients from paying excessive bonuses and protect taxpayer money. On March 18, 2009, House Republicans attempted to offer legislation on the floor that would have required Treasury to recoup the AIG bonuses and would have denied AIG any additional TARP funds until the bonuses were returned in full. The Democrat majority blocked consideration of the Republican proposal. Instead, Democrats will offer a constitutionally questionable 90% tax on some bonus recipients.
By legislatively imposing a tax penalty on employees that were given bonus payments by TARP recipients, some Members may be concerned that the underlying bill may violate the Constitutional prohibition on bills of attainder. Article 1, Section 9, Clause 3, states that "No bill of attainder or ex post facto Law shall be passed." A bill of attainder is an act passed by a state or federal legislature that punishes a specific person or group without a trial. In determining whether a piece of legislation violates the constitutional prohibition against bills of attainder, the Supreme Court generally tests whether the act specifies a group of people, contains a punishment specifically for that group of people, and does not require a trial. Given that criteria, this legislation could be ruled unconstitutional for imposing a tax penalty on a specific group of individuals.