Webb: Taxpayers deserve $10B from bonuses

U.S. Sen. Jim Webb told his colleagues Wednesday that taxpayers are entitled to as much as $10 billion from bonuses paid to executives of 13 financial institutions because the government "pulled their fat out of the fire" with federal bailout funds.

The Virginia Democrat has proposed legislation that would require a one-time, 50 percent tax on bonuses exceeding $400,000 that were paid to employees of 13 firms that received more than $5 billion from the Troubled Asset Relief Program, or TARP.

Speaking on the Senate floor, Webb said executives who took financial risks that helped grow the economy should be compensated and get a $400,000 bonus - which is about the same as the salary of the president of the United States. But taxpayers who shared the risk deserve something, he said.

Financial institutions "should be happy to take the money beyond that $400,000 bonus and divide it up with the average worker out here, who may not even own stock, who had to put their tax dollars in this order to stabilize the economy," he said.

Webb and U.S. Sen. Barbara Boxer, D-Calif., who co-sponsored the measure, indicated that the tax could collect as much as $10 billion from bonuses paid for work done in 2009. They proposed using the tax revenues to help pay down the national debt.

Economists told The New York Times that the hundreds of billions in loans and aid the federal government pumped into the city's banks fueled a quick reversal of Wall Street's fortunes.

The fast turnaround saved thousands of high-paying jobs and the bonuses that go with them, averting a sharper drop in tax collections and consumer spending that would have brought more layoffs in a wide range of businesses, economists said.

Webb and Boxer, who presented their proposal Wednesday to the full Senate, originally introduced a bill, but now have sought to amend it to a $149 billion jobs bill now being considered by the Senate.

Webb said he and other members of Congress who supported the TARP bailout in late 2008 did so because the nation's economy was in peril and the financial institutions need to "undo their systems of bad assets which had taken place, quite frankly, through a lot of bad judgment in their leadership."

"We did it with the explicit understanding that it was the American taxpayers who were putting the money in and who, when the system righted itself, would get their money back," Webb said.

Spokespeople for several of the affected institutions, including Freddie Mac, Citigroup, Bank of America and Wells Fargo, declined to comment on the bonus tax proposal.

Other firms whose executives would be affected are AIG, Fannie Mae, General Motors, GMAC, Goldman Sachs, J.P. Morgan, Morgan Stanley, PNC Financial and U.S. Bankcorp.

The New York Times contributed to this report.

Bill Bartel, (757) 446-2398, bill.bartel@pilotonline.com