To our surprise, Hill sources tell us House Speaker Nancy Pelosi is getting significant behind-the-scenes pushback from several of her committee chairmen against moving quickly on legislation imposing steep excise taxes on executive bonuses granted by firms that receive taxpayer bailouts, like American International Group, Inc.
We wholeheartedly endorse their belief that there should be a prudent and well-calculated examination of the situation before slapping together legislation to address the challenges presented by AIG's controversial rewarding of its officers.
Senior Democratic sources said Energy and Commerce Committee Chairman Henry Waxman, and Financial Services committee Chairman Barney Frank have argued privately that legislators should take more time and avoid creating an irresponsible tax-based response to the public outcry. House Ways and Means Chairman Charles Rangel even expressed public unease about attacking executive bonuses via the tax code, but that was before signaling Wednesday he was putting together legislation in coordination with Treasury Secretary Tim Geithner to do just that.
Quick legislative action has at best a checkered history that should not be ignored. One has only to look at the language capping executive compensation for firms accepting government bailout dollars for proof. Inserted during the closed-door negotiations last month on the final economic stimulus bill, the language effectively allowed AIG to still give immense contractually guaranteed pay-outs to employees after receiving taxpayer funds because the statutory limits only apply to future executive compensation contracts. This was something that may not have been understood by most lawmakers, but was clearly known to those with full knowledge of the bill both on and off Capitol Hill. It effectively calls into question the indignation displayed by some government officials to AIG's employee payouts.
Nevertheless, Pelosi and Senate Finance Committee leaders on both sides of the aisle appear hell-bent on moving legislation quickly and demonstrating to voters that they are on their side against the evils done to the economy by greedy corporate officers. President Obama said Wednesday that the ultimate responsibility lay with him to address the matter and that the White House was working with Congress to fast-track a regulatory response.
We urge the president to embrace greater deliberation and make sure all possible impacts are examined before moving forward with any legislative response. The situation is still evolving and AIG chief executive Edward Libby said Wednesday he is requesting employees who received at least $100,000 as part of the firms controversial bonuses to return at least half to the Treasury. The clear public relations angle of the move aside, the impact of AIG workers following up on the request cannot be denied.
The unofficial law of unintended legislative consequences, not haste, should be the guide for lawmakers on any matter. Bonuses are an important part of ensuring quality talent remains at a company and should not be discouraged. While the American taxpayer cannot afford to financially reward people who could potentially hurt the economy further, they also cannot afford for our government to create a response that could further heighten corporate and public anxiety.