After denying involvement on Tuesday, Senator Dodd admitted yesterday he is responsible for airdropping language into the stimulus package that allowed AIG to distribute $165 million in retention bonuses. But Dodd is pointing a finger directly back at the White House, claiming the Obama administration pushed for the language out of fear of potential lawsuits from AIG employees.
“I didn't negotiate with myself. I wasn't trying to change it on my own…the administration [had] expressed reservations. They asked for modifications.”
--Sen. Chris Dodd (D-CT), CNN, March 18, 2009
One of the most startling things about all this is that many of those here in Washington who are expressing shock and outrage that AIG would do something like this are the same ones who accepted the language protecting the AIG bonuses in the stimulus bill and voted it into law.
As I've said in the past: I don’t know how any legislator could vote on a bill that they didn't even have a chance to read, yet the Democrats pushed it through anyway. This is just the latest fallout from a piece of legislation that was rushed through and passed hastily. We really shouldn’t be surprised.
The truth of the matter is: It was full public knowledge as far back as May 2008 – long before Congress passed the misguided bailout that injected $170 million of taxpayer money into AIG. And, in November 2008, AIG convened a working group to figure out what to do with about these very bonuses. The Federal Reserve was a part of that working group. Let’s not forget who was the President of the New York Fed at the time – our new Treasury Secretary, Timothy Geithner.
Even Democrat Congressman Kanjorski, who ran the Financial Services Committee hearing yesterday with the AIG CEO, Edward Liddy, had this to say:
"I am sick and tired of hearing the administration and the Secretary of the Treasury say, 'I just found out about it.'"
--Paul Kanjorski (D-Pa), Washington Post, March 19, 2009
Legislators who voted for the bailout and for the stimulus that protected the bonuses are now scrambling to cover their backs by putting forth legislation this morning that will impose a 90% tax for bonuses received by an employee of a company that has received funds in excess of $5 billion from the Troubled Asset Relief Program (TARP)—or an employee of Fannie Mae or Freddie Mac.
Folks, two wrongs don’t make a right. Without the wrong-headed $700-billion bailout, the taxpayers would never have been put in the position of their dollars being doled out for executive bonuses in the first place. Congress is singularly ill-equipped to be a Board of Directors, and the bailout has put them right in the boardroom.
The bill on the House floor today, while not mentioning AIG by name, is clearly meant to punish a specific group of individuals in response to public outrage over the bonuses. The author of the bill, Rep. Rangel, explains his motivation for the bill by saying that he “had an obligation to respond to the fears and anger of the people.” Given this motivation, a legislative action aimed at punishing individuals, no matter how loathed or despised they may be, is explicitly prohibited by the Constitution in Article I, Section 9, Clause 3.
Larry Summers, President Obama’s top economic advisor, had this to say over the weekend – before he got the memo that the Administration was shocked and outraged by the bonuses they specifically protected:
“We are a country of law. There are contracts. The government cannot just abrogate contracts.”
-- Wall Street Journal, “Obama’s AIG Panic,” March 19, 2009
The government allowed this to happen - no ifs, ands, or buts about it. This feigned attempt by lawmakers to cover up their mistake should not distract from the fact that those responsible for allowing these bonuses thought they could sneak one by the American people and reward their political allies. This is certainly not a proud day for a Democrat White House and Congressional Majority that was elected on openness and honesty.