Moving with unusual speed, the Democratic-controlled US House of Representatives tonight passed legislation to recoup most of the $165 million in retention bonuses paid to 400 American International Group (AIG) employees.
Responding quickly to public outrage over the bonuses after the giant insurer received government bailouts of up to $180 billion, the House voted 328-93 to approve a 90 per cent tax on bonuses for some executives at companies getting federal aid.
The tax would apply to executives with incomes over $250,000 who worked for companies that got at least $5 billion in government aid. That could ensnare others getting federal help, such as mortgage financing company Fannie Mae.
"The whole idea that they should be rewarded millions of dollars is repugnant to everything that decent people believe in," said Democrat Charlie Rangel, the chairman of the Ways and Means Committee, which sets taxes.
Fury over the bonuses at AIG and other large companies that have received federal bailout money threatens to undermine President Barack Obama's efforts to solve the financial crisis and pull the economy out of a deep recession.
The Senate is expected to consider a different plan to recoup the bonuses, potentially a 70 per cent excise tax.
But some Republicans are pushing for hearings before drafting and voting on legislation, raising questions about whether legislation will pass quickly.
AIG chief executive Edward Liddy told Congress yesterday he has asked employees to give back at least half of their retention bonuses and that some had already given back their entire bonuses.
But he said the payouts were necessary to retain top employees with specialised knowledge to dispose of $2.7 trillion in complex securities that ended up dragging the insurer to the brink of collapse last year.
Angry House Republicans blamed Democrats who control Congress and the White House, accusing them of allowing the bonuses to be paid in the first place. Some questioned whether the legislation approved would survive court challenges.
Fury over the AIG bonuses threatens to undermine Mr Obama's efforts to solve the credit crisis and pull the economy out of a deep recession. He has said he might have to ask Congress for money beyond a $700 billion bailout fund approved in October.
"People are right to be angry. I'm angry," Mr Obama said yesterday. Many voters view the financial rescues as free handouts to wealthy executives who made bad decisions, and the big bonuses fuelled that anger.