[Congressional Record Volume 155, Number 46 (Tuesday, March 17, 2009)]
[House]
[Pages H3475-H3476]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             THE AIG CASINO

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from California (Mr. Sherman) is recognized for 5 minutes.
  Mr. SHERMAN. Mr. Speaker, the AIG Financial Products unit created a 
casino. At that casino, people were invited to bet on credit default 
swaps. Smart people went to that casino, the largest financial 
institutions, the richest and the most powerful in the world. They were 
smart. They bet against the mortgage market of the United States. They 
won. But they broke the bank.
  Now when ordinary gamblers break the bank, they have to settle for 
less than their full winnings. But these, as I said, are the most rich 
and powerful and best--connected institutions in the world, and they 
want everything the contract calls for. And that is why American 
taxpayers have provided $170 billion in payments and risk assumption so 
that these gamblers would be paid.
  That is not how capitalism is supposed to work. When you're owed 
money by an insolvent financial institution, that institution is 
supposed to be in receivership. Those who have insured accounts or 
insured life insurance policies get paid; everybody else takes a 
substantial haircut. But, instead, Wall Street is telling us that there 
is this sanctity of contract; so they must get every penny that Wall 
Street is supposed to get under the contract.
  Wait a minute. Sanctity of contract? Every bankruptcy, every 
receivership involves setting aside virtually every contract of the 
insolvent financial institution. And when Richard Nixon was President, 
he, through wage and price controls, shredded every wage contract in 
this country.
  Receivership is the way to clean up the balance sheets of our 
financial institutions. But we're not focused on it because it costs 
the shareholders, it costs the creditors, it costs management, and they 
would rather give us a ``solution'' that costs the American taxpayer.
  Receivership means that you strip some liabilities off the balance 
sheet. That is the way to strengthen the balance sheet of our financial 
institutions. Instead, we're told that the way to improve these balance 
sheets is to take assets off the balance sheet, albeit the so-called 
toxic assets. There's nothing the matter with those assets except 
they're worth less than they used to be. You do not strengthen 
financial institutions by taking their assets. You strengthen them by 
putting them in receivership and removing their liabilities.
  Now we're focused on the bonuses being paid to the croupiers of this 
AIG casino. Receivership would have been the clearest way to prevent 
those payments from being made, but we weren't told about those 
outrageous bonuses until hours before they were distributed.

                              {time}  1600

  Now all that money is in the hands of the executives. No doubt they 
have got them in Cayman Island accounts as we speak.
  Those bonuses should have been disclosed to us, but there is 
something this Congress can do, and that is through the Tax Code. 
Impose on the executives of all TARP bailed-out firms a special surtax 
on that portion of their compensation which is excess.
  I think that ought to be the portion in excess of $500,000, excluding 
restricted stock. That is the exact standard put forward by President 
Obama for his toughest standard on executive compensation.
  That tax could be at the 60, 70, 80 percent level, and those 
executives who did not want to pay the tax could, instead, return the 
excess portion of their compensation to their employer. It is important 
that this tax law apply not only to those who received excess payments 
in 2009, but also those who received the excess payments in 2008.
  We have a precedent for having excess profits taxes. We can have a 
special tax on excess compensation.
  We also, though, need to put AIG and others into receivership because 
this is the way we can deal, not with the bonuses, which are in the 
hundreds of millions of dollars, but deal with the tens and hundreds of 
billions of dollars of taxpayer money that are being disbursed to the 
wealthiest financial institutions of the world, including tens of 
billions of dollars going overseas.
  In order to get this economy moving again, we need banks and other 
financial institutions with strong balance sheets. The way to get 
strong balance sheets is to write down liabilities, not to ``get rid 
of'' certain assets by calling them toxic assets. It is unlikely that 
we will pursue this plan because it will lead to substantial losses for 
the most powerful, richest and best-connected institutions and 
individuals in this country, but it is the way for us to go forward.
  I look forward to working with my colleagues to getting to a plan 
that serves Main Street, not Wall Street.

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