Economist: Bonus bill would nix 1M jobs

The House-passed AIG bonus bill would lead to the loss of one million jobs, according to a senior economist at JP Morgan.

The legislation, which moved swiftly in the House last week, has dim prospects in the Senate. But some critics of the bill are nervous it may resurface later this year. Senate Majority Leader Harry Reid (D-
Nev.) is vowing to revisit the issue after the April recess.

{mosads}Michael Feroli, an economist at JP Morgan, recently issued an analysis that concluded that the bill’s restrictions on compensation would put companies receiving Troubled Assets Relief Program (TARP) funds “at a severe competitive disadvantage for talent relative to foreign banks which have not received such funds.”

Feroli wrote, “TARP recipient institutions would have a very strong incentive to return the funds.”

Plugging assumptions into economic models, Feroli stated the impact of the House bill “would be a decline of 1% and a loss in employment of just about one million jobs.”

House Majority Leader Steny Hoyer (D-Md.) said Tuesday that the bill has accomplished its mission even if it doesn’t become law.

Reacting to news that some of the now infamous bonuses to AIG have been returned, Hoyer said, “I think, apparently, the House bill had its effect. They’re giving it back.”

The House legislation passed 328-93, with 243 Democrats voting approving the legislation and six rejecting it. Eighty-five Republicans backed the bill, while 87 opposed the measure.

The Senate has indicated it is no rush to pass a companion bill.

Feroli said investors are pleased that the House legislation appears dead, claiming that some of Monday’s rally on Wall Street was attributable to the Senate’s decision to postpone consideration of a bonus tax bill.