Congress kills plan to recover Wall Street bonuses
WASHINGTON — Congressional leaders have killed a plan that would have forced financial institutions to compensate taxpayers if they paid their executives large bonuses after receiving federal bailout money.
The Senate had approved the repayment plan as part of an effort to crack down on Wall Street firms that paid huge bonuses — some in the millions of dollars — to their top executives even as they received taxpayer money in the federal bailout last fall.
The provision was removed as House and Senate negotiators hammered out final details of the $789 billion economic stimulus legislation this week.
A spokeswoman for Sen. Ron Wyden, D-Ore., said no one spoke against the amendment when Wyden introduced it on the Senate floor. "Somehow, it got stripped out behind closed doors," said the spokeswoman, Jennifer Hoelzer.
Wyden is looking for an opportunity to offer his amendment again to help taxpayers get their money back, Hoelzer said.
Sen. Olympia Snowe, R-Maine, co-sponsor of the amendment, issued a statement saying the financial bailout Congress approved last fall "left open an escape hatch of golden parachutes for top executives on Wall Street."
Many of the executives who got bonuses were the ones whose mistakes hurt the financial system and forced taxpayers to foot the bill in the first place, Snowe said.
The Wyden-Snowe amendment would have penalized companies that paid bonuses greater than $100,000 to executives after receiving government rescue funds last year. The companies would have had to repay within four months any portion of the bonus above $100,000 or face an excise tax of 35 percent on the portion of the bonus above $100,000.
Lawmakers removed the provision without explanation in closed-door talks this week. Hoelzer said several senators had questioned whether the provision was legal, since Congress had not limited the bonuses in approving the original legislation last October.
But Hoelzer said the measure was appropriate. She cited a letter from the Joint Committee on Taxation saying the measure "presents a strong case for constitutionality since it has only a modest look-back period."
Most of the bonuses in question were paid in the final two months of 2008.
The tax committee estimated that the Wyden-Snowe amendment would have raised as much as $3.2 billion. Financial institutions received more than $274 billion through the bailout program while paying out an estimated $18.4 billion in employee bonuses last year, the committee said.