Bonus-Tax Back-Down

So much for the bonus tax. The Wall Street Journal leads off its coverage this morning saying that "Congress's drive to recoup bonuses at American International Group Inc. is slowing significantly as passions on the issue cool." A week ago, the House overwhelmingly approved a bill to impose a 90 percent tax on bonuses distributed to the wealthiest employees at TARP bailout firms. A similar measure was expected as early as this week from the Senate. "But the legislation now appears certain not to come up in the Senate until after a two-week recess that begins April 3. It could be put off altogether if the administration demonstrates a commitment to reining in such payments in the future," the newspaper writes. In a further sign that tempers are simmering, House Majority Leader Steny Hoyer told Dow Jones newswire that legislation to tax the bonuses paid to AIG executives "may not be necessary if the bulk of the bonuses are paid back voluntarily."

There is still plenty of anger being vented toward AIG in Washington, however—and some of it could result in new financial legislation after all. The WSJ, in a separate article this morning, writes that the government's top financial regulators "are channeling widespread outrage" over retention bonuses at AIG to quickly win the authority to seize nonbank companies and freeze their contracts, "authority they have sought for much of the past year." In congressional testimony on Tuesday, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke lamented this oversight, saying that while Uncle Sam owns 80 percent of AIG, it was largely powerless to stop the mega bonus payout. "If a federal agency had had such tools on Sept. 16, they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate," Mr. Bernanke testified on Tuesday. The House financial services committee is set to vote on bestowing this power on federal regulators next week, the newspaper adds.

President Obama took to the airwaves last night to answer questions about his economic recovery plan and to defend his $3.6 trillion budget. According to the New York Times, Obama is willing to make concessions on middle-class tax cuts and enforcing a cap on carbon emissions, but, he declared, "the bottom line is that I want to see health care, energy, education and serious efforts to reduce our budget deficit." Hours earlier, however, Democratic and Republican lawmakers were looking for ways to chisel into the spending plan. The Washington Post reported on the front page that "Democrats in the House and Senate said they plan to cut hundreds of billions of dollars from Obama's spending request over the next five years. They also are scrapping Obama's plan to devote more cash to the financial sector bailout." The Senate is looking to trim the budget deficit by $200 billion, to $1.2 trillion, the newspaper writes, and to reduce it to $500 billion by 2014, mainly by borrowing less.

Japan, it might appear, has shut up shop. The Financial Times reports that exports nearly halved in February, falling 49.4 percent from a year earlier, as global demand for Japanese goods evaporated. That mirrors last month's dreadful export news, but more surprising is news that imports also tumbled far more than anticipated, "dropping 43 per cent amid declining corporate earnings and rising unemployment," writes the FT. If we needed any further indication of how the recession is hitting U.S. spending habits, these new figures show that shipments to the United States plummeted 58 percent last month, CNN Money reports. The export news brought the mini-rally experienced by Asian markets in the wake of the U.S. toxic asset plan shuddering to a halt. The benchmark Nikkei 225 average ended down 0.7 percent, to 8,426.72, in morning trading, having hit a two-and-a-half-month closing high the day before, Forbes reports.

Southwest Airlines has always bucked the industry trend, so even as global airlines look like they're losing nearly $5 billion this year, the budget carrier is expanding into new markets. The WSJ reports that Southwest is redeploying its fleet of more than 500 airplanes, "eliminating unpopular late-night and early-morning flights on some routes" in order to target more popular and competitive markets such as New York and Boston. Southwest CEO Gary Kelly is also exploring code-sharing deals with foreign carriers to open up new markets. Kelly's response—which also includes plans to entice more passengers onboard with in-flight Internet and more extensive wine and coffee services—comes as Southwest's passenger traffic in January and February fell 10 percent from a year earlier.

And, finally, is the world ready for another iPhone killer? The speculation is running high that Dell is working on just such a device, a new smart phone to take on the likes of Apple, Google, RIM, and Nokia. Business Week reports that Dell CEO Michael Dell "all but confirmed them while traveling in Japan on Mar. 24 when he said: 'It is true that we are exploring smaller-screen devices.' " Never mind that Dell has already tried—and failed—in this market before with the Axim personal digital assistant. Business Week reports that cell phone networks are unconvinced a new entrant in the smart-phone market can woo over prospective iPhone users.