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March 19, 2009
When and What did Treasury Know about AIG Bonuses? (updated)
For those of us without a clue about those AIG bonuses, here is the answer: The butler did it in the library with the wrench.
As Christopher Dodd has admitted, the Obama administration knew that the language allowing AIG to keep the executive bonuses was in the initial legislation and the Treasury Department insisted on keeping it there.
According to NBC news:
But on Wednesday, Sen. Chris Dodd, D-Conn., acknowledged that his staff agreed to dilute the executive pay provision that would have applied retroactively to recipients of federal aid. He said on MSNBC's "Hardball" that it was done at the request of administration officials.
"It's been reported widely the administration had problems with my language on the compensation," he told Chris Matthews, the show's anchor.
Dodd said the changes were made during the House-Senate conference on the $787 billion stimulus bill, which occurred in mid-February. At the time, Treasury officials were worried about lawsuits if the provision applied to existing compensation contracts.
"The alternative, frankly, was that we might lose the entire amendment," he said.
The provision was the subject of new attention this week because -- had it survived -- it would have prevented AIG from granting $165 million in bonuses to employees of its financial products division.
In short, according to Senator Dodd (who has been trying to save his own political hide -- so take everything he says with huge dose of skepticism), Treasury initially requested that the bonuses not be specifically excluded in the legislation for contractual and legal reasons.
Now, after the passage of the legislation and the public outcry over the “golden parachutes” the Obama administration and the Democrats are insisting that the bonuses be returned because of “moral” reasons.
Obama giveth and Obama taketh away.
Update - Richard Baehr adds:
Tim Geithner, who worked at the New York Federal Reserve Bank last fall, was intimately involved in all the negotiations about the government saving AIG from bankruptcy. The bonuses to be paid to various AIG employees was information that was available at that time. Of course, back in September and October, nobody was demanding an end to big Wall Street bonus paydays, and AIG was not the only fish in the fire.
Now we have Obama in office for two months. He rushes through Congress an 1100 page, 800 billion dollar stimulus bill. Nobody in Congress reads it before voting on it. Of course lobbyists for the unions, environmental groups and other big Democratic interest groups have read it, and inserted the sections to send taxpayer money to their pet causes.
Obama jets off to Chicago to spend 4 days with the family, playing and watching basketball, and not signing the bill until the following week at a campaign style event in a swing state. He too does not read it.
Last week there is suddenly great populist outrage from Obama and Congress over $165 million in bonuses to be paid to AIG employees, some of them very large bonuses, agreed to by the company almost a year earlier. The news comes out after the government agrees to provide another $30 billion to backstop AIG, in addition to the nearly $150 billion that has already gone into the company.
While the Democrats are baying at the unfairness of it all, it turns out that Connecticut's Democratic Senator Chris Dodd, recipient of very favorable loans from the failed Countywide, and one of the biggest recipients of AIG campaign cash (along with Barack Obama and Chuck Schumer), was responsible not only for inserting a last minute provision in the stimulus bill limiting executive compensation at firms receiving federal bailout money, but also an exception to the provision to allow for payment of bonuses contractually agreed to before February 11, 2009.
After first denying it (lying) to CNN, he now says he included this provision at the request of Treasury, in particular Geithner and Larry Summers, both of whom did not want to get the government involved in lawsuits related to violating contracts.
So we have the Democrats firing at each other to assess blame. I think many on Wall Street are overpaid. It is not a good thing when too much of the money in a society is produced by shuffling paper, rather than making things. Bubbles burst.
Now Democrats in Congress, and a few irresponsible Republicans are about to pass legislation with 90% tax rates on money paid to AIG employees as bonuses, and presumably for other people at other firms that got bailout money, and are now getting paid big bonuses due to the Dodd exception.
I don't think this legislation will pass a constitutionality test. But when President Obama behaves like Hugo Chavez, raging at the rich, and the culture of greed, while his own incompetent team is asleep at the switch , and the fools in Congress make things worse, we are in for a long 4 years. This is the change you could believe in?