CNBC "The Kudlow Report" - Transcript

Interview

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MR. KUDLOW: All right. Much more on the political scandal du jour, which we are renaming tonight AIG "Bonusgate." We welcome back a great friend to the show, Senator Ron Wyden, Democrat from Oregon.

Mr. Wyden, great to see you, sir.

SEN. WYDEN: Thanks for having me again, Larry.

MR. KUDLOW: All right. So I assume you want to recoup the money, so I'm just going to ask a follow up to my own question. How are you going to recoup this money?

SEN. WYDEN: We're going to pass bipartisan legislation through the Senate Finance Committee that's going to make it possible to tax, in effect, the excessive amount of these bonuses. And Larry, I tried to do this on the stimulus legislation. In fact, I was able to get through the Senate a bipartisan proposal that would have discouraged paying out these AIG bonuses. We weren't able to get it through; now we're going to be able to get it done.

MR. KUDLOW: Walk me through, Senator, briefly if you can, how do you tax the bonuses? I only ask that not because I disagree with you, I ask it because of the structure, the technique, because it's out the door. The bonuses have been paid.

SEN. WYDEN: We went to the Joint Committee on Taxation, Larry, and they said that if you gave the company a choice, either pay the amount of the bonus money back or pay an excise tax which, of course, is a tax on the bonus, that would pass constitution muster. And what we've done in our legislation, we've said, look, we're not interested in hammering a secretary. It's the excessive amount of these bonuses. And frankly, it shouldn't have been done in the first place. And I think the bipartisan effort that we're now going to get through the Finance Committee -- and I want to emphasize I've gotten it through the Senate already once -- will finally get the job done.

MR. KUDLOW: This is a very interesting point, and I'm glad you're here to tell us about it. The excise is on what? It can't be on the bonus money because that's out the door. Is it an excise on AIG or is it, in effect, an excise on any future government funding of AIG?

SEN. WYDEN: This is an excise tax on the excessive amount of the bonus. And the fact of the matter is these bonuses were just paid recently.

MR. KUDLOW: That's 160 million (dollars) some odd.

SEN. WYDEN: That's correct. And I think it's clear now there will be bipartisan support for what I've been able to get through the Senate already once. The fact on this AIG situation, Larry, is all around kitchen tables in this country, people are saying the regulators look like Keystone Cops, the company wins a Nobel for nonperformance. And it seems to me Jack Welch summed it up pretty well on your show. The government has got to act like a board of directors and either clean house or get this straightened out.

MR. KUDLOW: Oh, I agree, Senator. Is Tim Geithner going to wind up taking the fall for this because he knew? Everybody knows he knew, all the Treasury transition team knew, and he was the head of the New York Fed when the deal was cut.

SEN. WYDEN: The administration has been sending mixed messages on this bonus issue and, I think, the whole question of financial stability. The president stakes out strong positions, positions I happen to agree with, but somehow it's not getting followed through by the economic team. What I think I and Jack Welch are telling people who are listening to your show is the administration has got to get its act together, they've got to operate like the board of directors working with a CEO and get some changes.

MR. KUDLOW: Strong message, Senator Ron Wyden. We really appreciate it, sir. Thank you for the update on the excise tax.

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