[Congressional Record Volume 155, Number 46 (Tuesday, March 17, 2009)]
[Senate]
[Pages S3132-S3134]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      AMERICAN CREDIT CLEANUP PLAN

  Mr. BOND. Mr. President, I wish to talk about something that is 
happening at this moment and a problem we have to solve before we even 
look at what we do in the future. Like so many others--and I assume the 
occupant of the chair and all of my colleagues have heard the same 
thing--the phones in my office in the District of Columbia and across 
the State are ringing off the hook. Americans are outraged that their 
hard-earned taxpayer dollars are being used to pay bonuses at AIG. 
Yesterday afternoon and today, there have been countless press reports 
about these bonuses paid to some of the same people who may have been 
responsible for putting AIG into this mess. I agree. I, too, am 
outraged. It is unacceptable to pay bonuses after the American taxpayer 
was forced to bail out an institution without reforming it--without 
reforming it--without demanding any changes.
  While I share Americans' fury over this latest idiocy, I am, quite 
frankly, a little surprised to see the President and his Treasury 
Secretary so outraged by these bonuses when they had the opportunity to 
prevent them before they gave AIG the latest installment of taxpayer 
dollars. That is right, the Obama administration could have refused to 
pay the remainder of the $170 million in bonuses to failed AIG 
executives as a condition to providing that company the additional 
money it sought from the Treasury. Earlier this month, the Obama 
administration gave AIG another injection of $30 billion of taxpayer 
funds to keep this failed institution from failing even further. There 
is a rat hole, and we have thrown $170 billion down it.
  At the same time, Treasury Secretary Geithner should have and could 
have ensured that taxpayer dollars wouldn't be used to pay any of these 
bonuses, but he didn't. This is another example, I regret to say, of 
the Secretary's failed leadership. When he was President of the Federal 
Reserve of New York, he had oversight responsibility over AIG, Citi, 
and other of the major failed institutions. What was done? Obviously, 
the answer is ``not much.''
  The outrage over the bonuses really, in some ways, kind of misses the 
point. I believe that capping corporate pay and taking away business 
and private jets is not enough for the failed executives who got us 
into this problem. We need to go further. The failed senior executives 
and the board of directors should have been fired, should have been 
replaced when the Government first had to step in and rescue the 
company. Don't throw good money after people who are not running their 
institutions well.
  I can assure my colleagues that if any worker in Missouri or any 
other State across the Nation drove their company into the ground, they 
would have been and should have been fired. They wouldn't be receiving 
a bonus. I believe this double standard for Wall Street versus Main 
Street is another reason Americans are so mad about how their taxpayer 
dollars are being used.
  What is particularly troubling is that AIG's intention to pay these 
bonuses had been no secret, and the administration was completely aware 
of these payments. Now that Americans are outraged about how their 
taxpayer dollars are being spent, Secretary Geithner and President 
Obama are suddenly shocked and outraged as well. The real outrage is 
their ad hoc and knee-jerk reaction to the crisis. The administration's 
adhocracy amounts to spending billions--that is right, billions with a 
``b''--of good taxpayer dollars on the failing banks.

  What we really need, as I said last week, is to follow the words of 
that old country music song: ``We need a little less talk and a lot 
more action.'' We need to focus on the failing banks and others, and I 
have laid it out. It is called the American Credit Cleanup Plan. It is 
really very simple. It uses existing authorities for the banks, 
existing authorities within the Federal Deposit Insurance Corporation.
  There are three main steps that need to be taken: We need to identify 
failing institutions; we need to remove the toxic assets, protect 
depositors, and remove the failed leadership; and then return healthy, 
clean banks or portions of those banks into the private sector and get 
the Government out of running the businesses. Government doesn't do a 
very good job of running private business. I hate to say it, but our 
record in Congress on running our own business is not something one 
would hold up as an example of good executive management.
  Unfortunately, we don't seem to have any executive management in the 
administration, but we can send the FDIC in to clean up the banks and 
put the banks back into the private sector--at least in various pieces, 
whatever is sold off, whatever the market will buy--and let the market 
judge whether these new institutions, or institutions with these new 
portions in them, are working. There ought to be discipline in the 
marketplace. There has been no discipline.
  I agree with Americans who don't want to see their tax dollars going 
to failed executives at AIG or any other failing institution. Our plea 
is stop throwing good tax dollars at bad banks. The zombies should not 
be propped up without being cleaned up. We have well-established 
principles. We need bold action that fixes the root problems and a 
clear exit strategy in mind such as the American Credit Cleanup Plan. 
Get in, take out the bad assets, protect the depositor if it is a 
financial institution, clean out the boards of directors if need be, 
and put the bank or parts of it back in the marketplace.
  It is time the President and the Treasury realize that throwing good

[[Page S3133]]

money after bad is not the way to solve this crisis. We saw in the late 
1980s and 1990s where prompt action cleaned up the savings and loan 
crisis. It was actually savings and loans and banks. They went in, 
cleaned them up, sent them out, and the economy recovered.
  Japan tried what we apparently are trying to do now. They spent a 
decade throwing more Government money at failing institutions, and what 
did they get? They got a decade of stagnation. There is no reason for 
that to happen to us when we know how it is done.
  I have talked to Bill Seidman, who ran that operation. I have talked 
with former Chairman Greenspan and the presidents of the Federal 
Reserve of Kansas City and St. Louis, and they all say the same thing: 
Get in, clean them up, get the toxic assets out, get the Government out 
of running the banks and telling them where they spend their money and 
where they don't. Get them out and the economy will recover because the 
credit crisis will clear up. Until we do that, we will see more and 
more wasted dollars.
  I have talked with the leadership, and I hope they will bring up a 
measure I have cosponsored along with the chairman of the Senate 
Banking Committee, Senator Dodd, as well as Senator Crapo, to give a 
line of credit to the FDIC to do its vital cleanup work. They should 
expand their powers to go after bank holding companies if they are in 
bad shape. If we can pass that, they will have an additional tool. The 
FDIC has the basic tools. There is expertise there. Let's use the 
expertise and clean up rather than flooding these zombies with more 
dollars.
  Mr. President, I thank the Chair, I yield the floor, and I suggest 
the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SCHUMER. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                              AIG Bonuses

  Mr. SCHUMER. Mr. President, I will speak on a letter that myself and 
a number of colleagues are sending to the head of AIG, and I believe a 
few other colleagues will be here in the next half hour to speak on the 
letter as well.
  I rise today to express my outrage and the outrage of the American 
taxpayers at the bonus payments the American International Group 
intends to make to the employees of its Financial Products division.
  Yesterday, we learned that AIG is in the process of paying $165 
million in bonuses to the employees of its Financial Products division 
as part of the plan that will pay them $450 million in bonuses by the 
end of 2009.
  This is disgraceful, this is unacceptable, and it is an offense to 
millions of hard-working Americans whose tax dollars are the only 
reason AIG continues to exist as a going concern.
  Today, I rise to assure you, the leadership of AIG, my fellow 
Americans, and my colleagues, that we intend to do everything in our 
power to prevent those payments from being made and to recoup the money 
that has already been paid. As of now, eight of my colleagues and I 
have joined in a letter to Edward Liddy, the chairman of AIG, demanding 
that he renegotiate these contracts, and letting him know that we will 
not stand by. If Mr. Liddy does nothing, we will act, and we will take 
this money back and return it to its rightful owners--the American 
taxpayers. We will take this money back by taxing virtually all of it. 
So let the recipients of these large and unseemly bonuses be warned: If 
you don't return it on your own, we will do it for you.
  In the letter, joining me are the majority leader, Senator Reid; 
secretary of the caucus, Senator Murray; Senator Klobuchar; Senator 
Carper; Senator Lincoln; Senator Menendez; Senator Johnson; and the 
occupant of the chair, Senator Begich. The number is growing, and I 
believe many other people will put their names on the list.
  In the past year, we have learned much about the reckless behavior 
within our financial system. No firm was more reckless than AIG. What 
they did was not only irresponsible but, from a business perspective, 
it was immoral. They took what was a very solid, well-made business 
that sold insurance to individuals and firms around the globe and 
turned it into a gambling den that they used to enrich themselves. They 
sold credit default swaps and other derivatives to all comers as though 
they were playing with monopoly money, but it was real money. When 
their deals went sour, when they actually had to pay, they had nothing 
with which to pay anyone.
  As Warren Buffet said, ``When the tide goes out, you see who is 
swimming without a bathing suit on.'' The leadership of this unit of 
AIG was doing just that.
  Just this month--in fact, less than 3 weeks ago--AIG reported that in 
the final quarter of 2008, as a firm, it lost $61.7 billion. Let me 
repeat that. In a single quarter--in just the last 3 months of 2008 
alone--this firm lost over $60 billion. That is by far the largest 
single quarterly loss in corporate history. For all of 2008, AIG lost 
$99.3 billion, nearly $100 billion. Nearly all of those losses were 
caused by the actions of the employees of the Financial Products 
division. But, yesterday, we learned the firm intended to pay nearly 
$165 million in ``bonuses'' this year and a total of $450 million in 
bonuses over the next year for the employees in the very same unit--not 
only bonuses but performance bonuses--a performance bonus for a firm 
that lost $100 billion.
  I will repeat that. This is a performance bonus for a firm that lost 
$100 billion. If anything defines ``Alice in Wonderland'' business 
practices, this is it. It boggles the mind.
  In the past 6 months alone, the American taxpayers have been forced 
to commit over $170 billion to AIG. If the Government had not stepped 
in, if it had not repeatedly acted to fill the hole in the financial 
system created by this firm and these employees' behavior, AIG would 
have been bankrupt. All these employees would have received nothing--
zero.
  We keep hearing that AIG is contractually bound to pay these bonuses; 
that if they don't, these supposedly talented people--those whose 
talent created this disaster--will leave. Here is what I would like to 
know from Mr. Liddy: Did he even attempt to renegotiate these 
contracts? Did he approach these individuals and point out to them the 
health of AIG and the condition of the United States and global 
economies and their own culpability in creating this mess? Did they 
respond by saying: I don't care, I want my bonus? Is that what Mr. 
Liddy is suggesting?
  Well, Mr. Liddy, I urge you to fix this mess because, let me tell you 
something: We are all fed up. If you don't fix it, we will.
  Here is what we are doing: My colleagues and I are sending a letter 
to Mr. Liddy informing him that he can go right ahead and tell these 
employees who are scheduled to get bonuses that they should voluntarily 
return them because, if they don't, we plan to tax virtually all of it. 
He should tell these employees if they don't give the money back, we 
will put into place a new law that will allow us to tax these bonuses 
at a high rate so it is returned to its rightful owners--the taxpayers.
  For those of you getting these bonuses, be forewarned: You will not 
be getting to keep them.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Ms. KLOBUCHAR. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Udall of New Mexico). Without objection, 
it is so ordered.
  Ms. KLOBUCHAR. Mr. President, in the past few days, we have learned 
that the American International Group--known as AIG--has awarded $165 
million in bonuses to its high-end employees--the employees of its 
Financial Products group. These are people responsible for the fancy 
wheeling and dealing that nearly destroyed the company and wreaked 
havoc on our entire financial system.
  The American public is outraged by the arrogance and the abuse of 
taxpayer funds, and so am I. I was just in my State, where there are 
people barely holding onto their homes, people who have had their hours 
cut, and who are just one step away from their home going into 
foreclosure or from losing their car, and now we learn this today.

[[Page S3134]]

  Last year, under desperate but necessary circumstances, the U.S. 
Government had to rescue AIG from total collapse. This was done not to 
rescue the company itself but to rescue our financial system. AIG would 
not even continue to exist today except for the infusion of $170 
billion in taxpayer funds. The American people now own essentially 80 
percent of the company, and AIG is supposed to be doing everything 
possible to right itself. Well, they haven't.
  There is no rational way to justify these bonuses to people who have 
caused untold damage to our economy. This is not pay for performance, 
it is pay for failure, which makes no sense at all. Why should they get 
the golden parachutes when their company and our financial system have 
been crashing to the ground? The bonuses these individuals are 
receiving for their failure is more than most Americans make in a 
lifetime. The American people simply should not be in the position of 
rewarding the failure of high-flying Wall Street bankers who brought 
their company and our economy crashing down.
  That is why I have joined today with Senator Schumer and other 
colleagues in writing to Edward Liddy, the chairman and CEO of AIG. We 
are telling him if these bonus contracts are not renegotiated 
immediately, we will offer legislation that will have the effect of 
making American taxpayers whole. AIG needs to step up and do the right 
thing. But if AIG doesn't take action on its own to correct this 
outrage, we stand ready to take the difficult but necessary step of 
enacting legislation that would allow the Government to recoup these 
bonus payments through the Tax Code.
  If we are forced to do this, we will impose a steep tax, possibly as 
high as 91 percent, that would, in effect, recover nearly all the bonus 
money. Now, I am like most Americans; I don't like to see taxes raised. 
But in this instance, I think all of us can make an exception. If they 
refuse to do the right thing, then it is only fair to impose this kind 
of tax against the people who have done such great harm to our 
financial system. They can't walk away with millions of dollars.
  They may be laughing all the way to the bank right now, but if AIG 
can't or won't fix this problem, these people will soon be crying all 
the way to the tax office. These people seem to think they can operate 
with a height of arrogance and irresponsibility. This is not just a 
business outrage, it is a moral outrage.
  I am also concerned that in addition to the bonuses already handed 
out, AIG has plans to spend an additional $450 million in bonuses over 
the next 2 years. Based on what we know now, can we trust that these 
bonus payments go to the people who deserve it--the people who fix the 
problems rather than people who just make the problems?
  AIG is set to go into the history books as a company that symbolizes 
the type of greed and recklessness that has weakened our economy. Where 
I come from, we reward those who work hard and play by the rules and we 
take responsibility when we screw up. I believe the administration and 
Congress should do everything in their power to block these payments 
and demand accountability.
  Now, we know this is also an insult to the many good, strong, healthy 
financial institutions across this country--the small banks such as 
those we have in Minnesota; healthy financial institutions that didn't 
engage in these high-flying dealings that shouldn't be punished. Their 
stockholders shouldn't be punished because of what companies such as 
AIG did.
  As a prosecutor for 8 years, I dealt with criminals all the time. I 
have to say the white-collar crooks were often the worst to deal with 
because they claimed their crimes were an honest mistake and that there 
weren't any victims. As far as I am concerned, it didn't matter if 
someone stole with a crowbar or a computer or that they committed their 
crimes in a nice office or out on the streets, they need to be held 
accountable under the law.
  Time will tell, and the Justice Department and other prosecutors and 
police will sort this financial wreck out to see when and where crimes 
were committed, but it is clear that what we need is accountability. If 
AIG's leadership won't demand it, we will.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Arkansas is recognized.
  Mrs. LINCOLN. Mr. President, I rise to join some of my colleagues to 
express our deep frustration with the financial institutions that have 
made the very poor decision of handing out multimillion dollar bonuses 
at taxpayers' expense--AIG being the latest in the line of continuing 
irresponsible behavior coming from Wall Street.
  I have hard-working families--and there are hard-working families all 
across this great Nation--who are saying: Enough is enough.
  This is not the kind of behavior Americans should be accepting at 
this time. It is completely irresponsible. Times are tough and people 
are sacrificing. People all across this country are sacrificing. Many 
employees in my State are seeing their hours cut or they are finding 
themselves out of work altogether. How are they caring for their 
families? They are working hard to look for that next job to put dinner 
on the table or to get their kids to school or making sure they can 
keep their families together.
  I have talked to recent retirees who have been devastated because the 
nest egg they have been saving all these years has been slashed by 40 
or 50 percent in just a matter of months. Now they are having to 
dramatically downsize their quality of life or go back to work, if they 
can even find work. I met a gentleman this weekend who is beginning to 
have college-age kids. He spent his entire life working to save for 
those college funds only to find that in these last several months they 
too have been slashed in half.
  These people are realizing the impact of what is happening not only 
in our country but globally. They are standing up as Americans. They 
are willing to make sacrifices. They are working hard to keep body and 
soul together. But it is absolutely, unequivocally totally unacceptable 
for failed financial institutions that have received taxpayer 
assistance to be rewarding their employees with bonus payments at this 
time. It is outrageous and it will not be allowed.
  We are the stewards of the taxpayers in our States and of the dollars 
we have provided in good faith as an investment in these companies to 
try to make sure they, too, can make ends meet. But this isn't making 
ends meet--handing out tremendous bonuses to just a select few. It is 
absolutely irresponsible.
  During the debate of the recovery package, Senator Wyden and Senator 
Snowe and myself offered an amendment that put an excise tax on bonuses 
and financial institutions that had received TARP dollars. We did so 
because we feared this very thing would continue to happen. 
Unfortunately, our proposal was taken out of the package in the 
conference. So I am pleased to hear many of my colleagues who are now 
in agreement that something must be done to correct this travesty.
  Make no mistake, if these companies handing out multimillion dollar 
bonuses do not rectify the situation, do not change their ways, we 
stand ready to work to enact legislation that recoups these tax dollars 
and these taxpayers' funds. Our taxpayers have worked hard and they are 
suffering as much as anybody else. But we do not need to see these 
major corporations and financial institutions that are handing out 
these unbelievable enhanced bonuses at a time when we should all be 
pulling together, pulling together to make our economy strong, to set 
it back on track and to make sure we can embrace and continue the kind 
of quality of life that all Americans need to be able to realize.

  I yield the floor.

                          ____________________