Lobbyists Launch Effort to Soften Tax on Bonuses
Financial services lobbyists have moved into hyperdrive, engaging in a behind-the-scenes counterattack after lawmakers trained their eyes on all bonuses paid out by struggling banks.
Banks that took millions of dollars in federal bailout money and their trade groups held several conference calls Wednesday to figure out how to respond to the swift-moving bonus bills, according to lobbyists who participated in the calls.
“Democrats right now are in a firing circle,— said one financial services lobbyist of Capitol Hill’s response to AIG’s bonuses. “They are trying to play the fine line between politics and policy.—
Several banks decided to weigh in on the issue after the top Democrat and Republican on the Senate Finance Committee proposed Tuesday to tax bonuses of executives at firms receiving the federal bailout.
Legislation put forward by Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa) would levy a 35 percent tax on employees receiving the bonus and a 35 percent excise tax on the financial services company that paid it. The legislation applies to all bonuses earned or paid after Jan. 1, 2009.
The banks’ main goal is to narrow the breadth of the legislation as much as possible, and they are targeting key players on the House Financial Services Committee and Senate Banking, Housing and Urban Affairs Committee.
“All of the TARP recipients are lobbying heavily on the various proposals that have been put in so that they don’t do damage,— said one outside consultant for several Troubled Assets Relief Program recipients.
Financial services trade groups have been working the issue as well, including the Financial Services Roundtable, which opposes the broad bonus legislation.
“The government shouldn’t prohibit expenses that will help strengthen the company,— said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable.
Several proposals surfaced Wednesday as the House Judiciary and Ways and Means committees turned up the pressure for AIG employees to return their bonuses.
AIG Chief Executive Officer Edward Liddy told lawmakers in a House Financial Services subcommittee hearing Wednesday that he has asked employees who received more than $100,000 in bonus payments to return at least half of the money.
But financial services lobbyists said they still don’t expect to thwart the legislation entirely.
The banks’ proactive moves are in contrast to their apparent timidity during the debate on executive compensation limits in the original federal bailout legislation.
“There was technical language being vetted, but it was not an overarching lobbying effort,— said a financial services lobbyist who was involved in the issue.
The swelling anger on Capitol Hill comes as the Obama administration is expected to roll out its plan to purchase toxic assets from the banks in a public-private partnership.
But any move to slap bonus restrictions on private investors that are part of the partnerships could scare them off, lobbyists said.
“If there is any hint that people investing in [Term Asset-Backed Securities Loan Facility] are subject to those rules, they won’t raise any money,— said Ken Kies, a tax lobbyist and managing director of Federal Policy Group.
Lobbyists who work for federally bailed-out banks also have a vested interest in seeing the legislation stopped. Most senior lobbyists at banks such as Citigroup, JPMorgan Chase and Bank of America, earned well over the $50,000 bonus threshold in the Senate legislation.
Still, as some of those lobbyists look to exit struggling banks, not everybody is rushing to weigh in.
Some in-house lobbyists are reluctant to use their own political capital to push back on the issue, given the widespread bipartisan anger over bonus payments, according to a financial services lobbyist.