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Monday, March 23, 2009

Why Pelosi fails to Lead! AIG Bonus Bill's unintended Consequences

Lawmakers bellowed with outrage last week following revelations that AIG was paying millions in bonuses to employees at a rogue division based in suburban Connecticut.

But the restrictions House members prescribed in response -- a 90 percent tax on those bonuses -- could have painful side effects for the subsidiaries of other bailed-out financial companies, including one located just a few miles away from the troubled AIG unit.

Phibro, a commodities trading company located in Westport, Conn., potentially could be hit with the 90 percent tax on bonuses since its parent company, Citigroup, has received $45 billion in bailout money.

Phibro, though, has not actually taken federal rescue funds and is considered a relatively stable and profitable subsidiary of Citigroup.

The subsidiary side effect is just one example of the complications the House-passed bill could create if such a measure clears the Senate and heads to President Obama's desk.

U.S. Rep. Jim Himes, D-Conn., who represents the district where Phibro is based, said the bill is "undoubtedly replete with unintended consequences" -- the product of what he called "hasty work."

Himes, who voted for the bill, said hefty taxes on subsidiaries of bailed-out firms are one such consequence.

"Phibro is to my understanding a profitable entity that employs a lot of people," Himes said. "We need to be careful, as this legislation winds its way through Congress and to the White House, that we don't dis-incentivize or harm groups that are profitable and doing well."

Himes said Andrew Hall, head of Phibro, "did express some concerns" to him about the bonus tax bill during a recent conversation.

But the Connecticut Democrat said he expects the Senate to work up an entirely different bill to address excessive bonuses. He said the House version was a "signal" to taxpayers that Congress is paying attention to the issue, but not a final product. - FOX News Story

I just about fell out of my chair when he says the "House versions was a 'signal' to taxpayers that Congress is paying attention to the issue". Are you kidding me, they made a knee jerk reaction and had no idea what they were doing. Pelosi is an idiot that jumped up and down saying that this bill will show we are serious.

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