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Citigroup, Bank of America, JPMorgan criticize proposals to tax bonuses

Citigroup Inc. (C), Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) criticized congressional proposals to tax bonuses paid to top executives working at companies that have received at least $5 billion in aid from the US government.

Bank of America CEO Kenneth Lewis called the tax "unfair" in a memo to employees yesterday, while Citi's Vikram Pandit said his bank is "working in every appropriate way with policymakers." JPMorgan's Jamie Dimon said, in a conference call with about 200 executives, that the firm is concerned about retention and is working with lawmakers.

U.S. lawmakers look set to pass a bill that would impose a 90% levy on employee bonuses. The tax would apply to bonuses paid to high earning employees at companies that have received at least $5 billion in aid from the US government.

The move comes in the midst of an uproar over $165 million given to AIG employees despite the fact that the embattled insurance giant is dependent on taxpayer funds.

News that broke Tuesday that 73 AIG employees received bonuses of at least $1 million each, with 11 of those having left the company in the meantime has outraged lawmakers already upset over the bonus structure. Of those 73 $1 million-plus bonuses, 7 employees received over $4 million and the top bonus was $6.4 million.

Members of the House Financial Services Subcommittee expressed their outrage over the bonuses at the hearing.

AIG's CEO Edward Liddy said that many executives have already returned part or all of their bonuses. In his testimony, Liddy, who was appointed 6 months ago as part of the deal for the government to bail out the insurer, said that AIG plans to return the $170 billion in tax funds given to the insurer.

However, Liddy faced anger from both sides of the aisle, with House Democrats and Republicans lashing out over the bonuses. The GOP anger was directed at officials in the Obama administration as well, specifically Treasury Secretary Timothy Geithner.

With the financial crisis tightening its grip, several companies have had to seek government help to keep afloat. However, the way many of them have used the rescue money has led to public outrage as well as lawmakers' ire.

Bank of America has been in the spotlight for some weeks over the hefty bonuses paid to Merrill Lynch executives just before the consummation of the merger, when it was seeking more U.S. help to see the deal through. Cuomo is conducting an investigation into the timing, propriety and disclosure of the $3.6 billion bonus payments made by Merrill.

Wednesday, in a setback to Bank of America's efforts to keep under wraps the details of the bonus recipients at Merrill Lynch, a New York state judge said these names are no trade secret.

It was reported Thursday that Citigroup, which received government help three times to weather the credit crisis, plans to spend about $10 million on new offices, including for its CEO Vikram Pandit. Citi defended the remodeling, stating it would help it save money over time.

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