You know all this fab populist outrage at AIG’s behavior from our President, Senator Schumer, Senator Dodd, Senator Grassley, and Barney Frank? Well, Congress knew about these bonuses before now. WAY before now. If any of these guys supported any of the bailouts, but especially the AIG bailouts, with no strings attached, then they are also partly to blame for the current problems we have. So spare me all this moral outrage. They are also to blame because the requirement that these contractual obligations must be paid is in the stimulus bill, thanks to Senator Dodd.
From Politico:
AIG disclosed its retention-bonus program more than a year ago, including bonuses directed to those handling the exotic derivatives that got the company and the country into this mess.
The bonuses were essentially a nonissue when AIG got its initial bailout money, almost $150 billion under President Bush in the two months surrounding the presidential election. Joe Biden, then the vice presidential nominee, came out strongly against the bailout. Obama did not.
Timothy Geithner, then at the New York branch of the Federal Reserve, was a huge proponent and architect of the AIG bailout. So if Obama had strong private opposition to the idea it did not affect his pick for the person who would oversee all bailouts.
They knew — and even knowing about AIG’s plans to award these bonuses, there were no serious attempts by Congress to hold these bailout recipients accountable to the taxpayers for the money they have spent. It’s a fair bet that at this point Congress has relatively no clue where the money ended up, and they still want to take even more money to sink into a plan THAT IS FAILING to achieve its objectives. Stop the madness.
From the Washington Post:
The payment plan had been no secret.
Beginning in the first quarter of 2008, AIG disclosed the plan to offer retention awards at Financial Products. The unit had already begun to hemorrhage money, a problem that would later grow exponentially. The unit’s executives, fearing they might lose valuable employees in the tumultuous months to come, successfully negotiated more than $400 million for their workers, to be paid this month and again next year.
At the Federal Reserve Bank of New York, which has directly overseen AIG since its federal takeover in September, officials have studied the possibility of rescinding or delaying the bonuses. They even brought in outside lawyers for advice. The conclusion: If the bonuses weren’t paid, the AIG staffers would be able to sue the company and probably would win, not just what they were owed but also punitive damages that would make the ultimate cost perhaps two to three times as high as the bonuses themselves.
Moreover, Fed officials also hope to keep current employees with the company. The senior executives whose decisions caused the company’s collapse are long gone. Most of those left behind are trying to unwind complicated derivative contracts. Completing that process correctly is essential to preserving as much value as possible for taxpayers, officials at both the government and AIG have argued. If it is mishandled, it could expose taxpayers to billions of dollars in additional losses.
This argument makes sense, but AIG paying out these bonuses is still more than a little tone-deaf in the current economic climate. No one is going to bail out the average American who pays his or her bills on time every month. Our government will continue to reward the irresponsible and there’s nothing we can do about it.
Right when we start to agree 🙂
What do you mean Congress knew about these bonuses beforehand? It was the Bush administration that carried out the bailout, not congress. The Treasury Department was in charge of presenting to congress the terms of the bailout, the fault first lies with the administration. Does that exempt congress? Nope, but unlike your numerous links blaming Dems and Chris Dodd, it was Sen. Dodd’s amendment that actually restricted compensation (blocked bonuses).
The Dodd amendment specifically states:
TARP recipients shall “meet appropriate standards for executive compensation and corporate governance”: “a prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period that the obligation is outstanding to at least the 25 most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.”
It was the conference committee that modified Dodd’s amendment, the committee assigned to reconcile the different versions of the House and Senate bills. Dodd’s amendment did not restrict language that allowed these bonuses to happen. In other words, Dodd did not put in the stimulus bill any “requirement that these contractual obligations must be paid.”
It was also Republicans who were against salary caps of any kind. Caps could have easily prevented the bonuses:
Blaming the Dems is partially right, I don’t deny that at all. The GOP is far from the moral crusaders in this, however.
Addendum to my last comment: not sure if you watched the hearing today with AIG CEO, Ed Liddy, but even he acknowledged that the feds along with Chairman Bernanke knew about the bonuses when they signed on to conditions for the bailout. He said nothing about congress knowing. Probably because it was not up to congress, it was the Treasury who was in charge of this. They presented the terms to congress.
and it goes on…
Could congress had paid more attention? Absolutely! But any effort at limiting CEO pay would have met stiff GOP resistance, and been called socialist by the Repubs.
I said that I believed that Congress knew about the bonuses beforehand via Politico and WaPo links. You’re saying that the Bush Treasury Department failed to inform Congress of information related to AIG’s planned bonuses (which I assumed from those articles to be public knowledge a year ago)? That’s not the interpretation I’m getting from your last comment. Doesn’t make much difference to me either way, because Congress had a responsibility –along with the Bush AND Obama Treasury departments throwing out all this money — to do some homework and make an informed choice about who should get money and to put sufficient strings on any taxpayer money distributed to all these companies. That’s why we pay them the big bucks.
I haven’t excused Republicans of partial blame on this. You know that. 🙂
Eventually the Dems will have to take responsibility for their own choices. Oh boo hoo…the mean Republicans could call them socialists (or my new preferred term – the anti-capitalists). Sometimes they seem to forget that they are the majority and can pass whatever the heck they want to pass without the Republicans. At this point I have zero sympathy for any whiny Congressional Democrats.
You said the Democrats, specifically Chris Dodd, were to blame because they included in the stimulus bill a “requirement that these contractual obligations must be paid…” That’s just not true. Dodd’s amendment did no such thing. I linked to the actual text of his amendment.
No where in your original post do you mention that it was ultimately the responsibility not of congress but Bush’s treasury to implement TARP. So if Congress knew about the bonuses, and I’m sure they did, it was at the advice of Bush’s treasury that TARP was good to go.
It was actually Dodd’s amendment that would have prevented bonuses but Republicans were busy fighting against caps trying their hardest to prove their American capitalistic credentials:
The easiest and quickest way for Congress to keep the bonuses from being paid would have been to institute caps, something the GOP strongly opposed. If congress failed, it did so with huge Republican support.
If you haven’t excused Republicans, then where is the mention that it was Bush’s treasury who implemented TARP? And where are mentions about Republicans opposing salary caps, which was the best way to ward off any bonuses? Maybe if the GOP wasn’t so focused on name calling and trying to find out new ways to question someone’s patriotism, they would be able to focus on making informed decisions for which they earn their big bucks.
The Dems do indeed have a majority, but when TARP was passed the Republicans still controlled the White House. There is no way Bush would have signed anything that contained salary caps. Plus the Dem majority was much smaller in September than it is now. Did the Dems in control fail with TARP? ABSOLUTELY! I’ve been saying that from the beginning.
There seems to be quite a bit of disagreement about who should receive credit / blame for the final version of the Dodd amendment, so I’m not withdrawing my comment about it until that question is resolved to my satisfaction.
I didn’t mention Bush’s Treasury Department in my original post. I didn’t need to. It’s common knowledge that all these bailouts started under the Bush Administration, and I opposed each and every bailout that happened at the time it happened. I can give you lists of posts in opposition to the bailouts, but you don’t need them because you know what my position has always been.
As far as salary caps, I still can’t say I am inclined to support them for CEOs. I remain opposed to government interference in private companies, although I understand why it happens to the ones that are stupid enough to take government cash. However, I agree with Kit Bond. Here’s a longer version of it from your link:
The worst thing we can do is tell businesses how to run themselves. Congress has a pretty bad track record. If you you look at our collective jdugement, all 535 of us in our wisdom cant run government very well. (We) sure cant run business.
As far as capping CEO pay for people who really loused up, we ought to fire them. Were not going to fire them, but the boards of directors ought to fire them; thats what they did in Sweden. They need to get rid of these people, not cap their pay at $400,000. They arent worth that. Bring in people who can do the job.
That’s a very defensible position. Fire the CEOs who screw up. That’s a better form of accountability than salary caps, at least in my civilian opinion.
As best as I can tell it was indeed Dodd who allowed language amending his amendment into the stimulus bill. You were right, I was wrong.
His original amendment did not allow bonuses, but a change to the amendment did. Yesterday Dodd denied allowing the change but finally admitted that he did change the amendment with pressure from the White House to do so.
Terrible mess if you ask me.
Well… Lisa won that one. Of course Dodd is corrupt. The same AIG muckety mucks in line for the bonuses have contributed tens of thousands of dollars to his political campaign fund. This is pay to play, pure and simple. Quid pro quo.
I love how Chris refuses to see the obvious pattern emerging whereby guys like Chris Dodd and the other friends of Freddie and Fannie are the cause of our problems, not the solution.
Not sure what there is to win. I’m wrong quite a bit. I’m also not sure what else I can do other than admit that I was wrong. I took Dodd at his word, turns out he lied. Dodd’s original amendment did prevent bonuses like I linked to above. Then the Federal Reserve leaned on Dodd to relax the language. So Dodd did. This happened under the Bush administration not the Obama administration. It was Bush’s Federal Reserve that wanted the language changed. Dodd shouldn’t have caved and lied about caving but that doesn’t change the fact it was the GOP that wanted the bonuses to happen. Again, not sure what else I can do other than admit I was wrong about Dodd not allowing the bonuses. He obviously did.
Fair enough.
Jaz,
I will take whatever small advantages I can get. Chris is a tough opponent. I don’t often get the chance to say “I told you so” in a discussion with him, so I have to take every opportunity that presents itself to me. 🙂 However, I will never be satisfied with the level of responsibility he assigns to Democrats like Barney Frank for their culpability in this financial mess (Fannie / Freddie, etc). So I’ve given up fighting about that, because as we all know, Democrat corruption is all the fault of the GOP and George W. Bush.
Sadly, only those who watch Fox News and listen to Rush Limbaugh believe Fannie/Freddie deserve more blame for the financial mess we are in. That’s a crowd I want nothing to do with.
And then Chris trots out his usual canard/ad hominem attack.
I want nothing to do with formulaic arguments that I’ve heard countless times before, each time less and less compelling.
I went through this thread almost falling out of my chair. Is that Chris Barr being cordial and pleasant to Lisa? I thought, ‘this is almost too good to be true.’ Like we’re going back in time, to a better year when CB was reasonable and cordial to all of us. And I’m talking to the screen, ‘Of course you’re wrong about Dodd.’ And then, when he admitted he was wrong, I almost fell out of my chair again. But I should have known it really was all too good to be true.
Chris can’t be Chris without dropping the obligatory ‘Fox News/Rush Limbaugh…’ bomb.