Joining the push for new legislation in response to lavish bonuses paid in the financial industry, Sen. Sherrod Brown (D-Ohio) has introduced legislation that would tax bonuses paid to executives by banks that received government bailout funds.
The bill would tax cash and stock bonuses of more than $25,000 by 50 percent, diverting the money towards loans for small businesses.
“It’s time for Wall Street to return the favor to Main Street,” Brown said in a statement Thursday. “While big banks have rebounded thanks to the help of American taxpayers, small businesses are still struggling. If a big firm that received taxpayer help is now paying out massive bonuses, they should be able to help American small businesses expand operations and hire new workers.”
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Additionally, many of the banks receiving money from TARP have also cut down on loans to small businesses.
Two other Democratic senators, Barbara Boxer (D-California) and Jim Webb (D-Virginia), recently proposed legislation to impose a 50 percent tax on bonuses above $400,000, but only for firms that received $5 billion or more in bailout money. A bill has also been introduced in the House by Rep. Peter Welch (D-Vermont), which would tax bonuses above $50,000.
The Obama administration predicted that Troubled Asset Relief Program (TARP) costs would ultimately reach $90 billion. Since then, President Obama has proposed a fee on the largest US financial companies to recoup the money.
According to Brown’s statement, the average executive at Bank of America received a $400,000 bonus one year after the bank took $45 billion in bailouts, while the average worker in Ohio makes just over $41,000 a year.
Goldman Sachs, which took $10 billion in bailouts, gave its chief executive a bonus of $9 million for 2009, cutting the amount down in an effort to diffuse public anger. AIG paid out $100 million last week and $165 million last year in bonuses. The payments had been stipulated in contracts signed before the company received bailout money – about $182 billion, the largest in American history to date. While AIG has also attempted to reduce its bonuses, as employees agreed to a $20 million reduction last week and the company said it would return $45 million of the 2009 bonuses, not all employees have agreed to the reductions or returned the money yet.
“Fifteen months after Wall Street drove our economy off a cliff, the same big banks that survived thanks to taxpayer support have returned to their old ways,” said Welch. “Rather than invest in our nation’s economic recovery or shore up their balances, these banks have chosen to reward themselves with excessive bonuses. By diverting outsized bonuses to small business lending, this legislation will support our local economies in a way that Wall Street has failed to.”