Bonuses allowed by stimulus bill, effectively exempting AIG

[question everything]

From CNN

WASHINGTON (CNN) -- Democratic leaders scrambling to strip AIG executives of bonuses are having a hard time answering a key question: Why didn't Congress act to prevent the bonuses in the first place? Sen. Chris Dodd says he has no idea how the exemption clause got inserted into the recent stimulus bill. "There's always more we can do, and hindsight is 20/20," said Senate Majority Leader Harry Reid Tuesday. But though some lawmakers did move to prevent bonuses in the stimulus bill last month, the final language actually makes an exception for pre-existing contracts, effectively exempting AIG.

Senate Banking Committee Chairman Chris Dodd, D-Connecticut, who originally proposed the executive compensation provision, said he did not include the exemption clause, which said new rules "shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009." In an interview with CNN, Dodd denied inserting that exemption at the 11th hour, and insisted he doesn't know how it got there. "When I wrote the language there was no such language like that," Dodd told CNN Tuesday. Who's insured by AIG? »

Multiple Senate Democratic leadership sources also deny knowing how the exemption got into the bill. The mystery isn't just how what was effectively a protection for AIG was put into the stimulus bill -- it's also how a provision intended to prevent AIG from giving executive bonuses, was taken out. The Senate passed a bipartisan amendment proposed by Sen. Olympia Snowe, R- Maine, and Sen. Ron Wyden, D-Oregon, that would have taxed bonuses on any company getting federal bailout dollars, if the company didn't pay back the bonus money to the government. But the idea was stripped from the stimulus bill during hurried, closed-door negotiations with the White House and House of Representatives.


Senate Finance Committee Chairman Max Baucus, D-Montana, who is now pursing a similar bonus tax idea in the wake of outrage over AIG, said it was a mistake to drop it from the stimulus bill. He made a stunning admission. "Frankly it was such a rush -- we're talking about the stimulus bill now -- to get it passed, I didn't have time and other conferees didn't have time to address many of the provisions that were modified significantly," said Baucus. "We shouldn't be here. That should have passed, but it didn't," he said.iReport.com: Sound off on AIG

Snowe chastised colleagues for expressing outrage about AIG's bonuses, when just last month they did away with her amendment intended to prevent it. "We tried. It simply didn't happen, and that's a tragedy, given what's happened today," Snowe told CNN in an interview. Majority Leader Reid would not directly answer a question from CNN about whether that was a mistake.

http://www.cnn.com/2009/POLITICS/03/17/aig.bonuses.congress/index.html


======

On CNN earlier this morning, reporter Drew Griffin put a call to all staff members to find out how this exemption got put into the bill.

[BadgerKid]

1. No one could have foreseen this?

I mean, since everyone was sure to read the bill before the final vote.

:sarcasm:

[Hepburn]

2. Just curious....

...but I wonder which lawmaker(s) insterted that clause and how deep he/she/they are in the AIG pocket.

:mad:

[question everything]

5. This is why the CNN reporter issued an open request

to everyone on the Hill to find out.

(Cute Scotty)

:hi:

[formercia]

3. Just like the clause that exempted oil producers from paying royalties

just somehow appeared in the final bill.

Nobody reads these bills. The staffers type it up from notes given to them by the lobbyists.

[kentuck]

4. Where's Joe Lieberman??

Is he on that Committee??

[question everything]

8. Probably not, but it is the other Senator, Dodd who finally admitted (nt)

[Laelth]

6. We were blackmailed.

We had to have AIG's participation in the bailout. Both parties knew it, and both parties have taken steps to insure it.

AIG and bank executives said they would not participate if their bonuses were capped. They blackmailed us. The Federal Government can't let these banks (nor AIG which insured the credit default swaps) fail, because if it did, foreign banks would lose confidence in the U.S. and would not loan the government the $1.5 trillion it needs to keep the government running. Foreign banks finance the U.S. national debt, and AIG insures those banks against losses. AIG held a gun to our head and said, effectively, give us our bonuses or the whole Federal Government collapses because no bank will be willing to lend the U.S. money.

So, Treasury insisted that the bonuses be allowed, and the restriction against them (that Dodd had insisted upon) was removed.

That's what I think happened.

:dem:

-Laelth

cross-posted--seven times now.

[question everything]

7. Now Dodd admits that it was he who inserted the language

Dodd facing fresh political firestorm

en. Chris Dodd (D-Conn.) looks like he may be facing a fresh political firestorm.

Dodd just admitted on CNN that he inserted a loophole in the stimulus legislation that allowed million-dollar bonuses to insurance giant AIG to go forward – after previously denying any involvement in writing the controversial provision. .

“We wrote the language in the bill, the deal with bonuses, golden parachutes, excessive executive compensation that was adopted unanimously by the United States Senate in the stimulus bill,” Dodd told CNN’s Wolf Blitzer this afternoon.

“But for that language, there would have been no language to deal with this at all.”

Dodd had previously said that he played no role in writing the controversial language, and was not a part of the conference committee that inserted the language in the bill. As late as today, Dodd’s spokeswoman denied the senator’s involvement.

More..

http://news.yahoo.com/s/politico/20090318/pl_politico/30833

[Jefferson23]

9. Greenwald with 4 updates on Dodd:

UPDATE: Just in case the point wasn't yet crystal clear, here is a Think Progress report from February 15, 2009, reporting on the White House/Dodd dispute over the executive compensation provisions. Is there any doubt which party was the one demanding weaker and narrower executive compensation limits? (hint: it wasn't Dodd):

Having the White House blame Dodd (rather than itself) for this exemption is such a gross offense to the truth.



UPDATE II: Rather oddly, the NYT article I quoted above, by David Herzsenhorn, has been moved on the NYT site and is now at this link (see here). Most importantly, it has been re-written to reflect that fact that it was not Dodd who inserted the exception for past contracts:

But Mr. Reid mostly ducked a question about whether Democrats had missed an opportunity to prevent the bonuses because of a clause in the stimulus bill, that imposed limits on executive compensation and bonuses but made an exception for pre-existing employment contracts.

Senator Christopher J. Dodd, Democrat of Connecticut, who initially proposed adding executive compensation and bonus limits to the stimulus bill, did not include the exception.

In the place of the Herzsenorn article is now this article by Jackie Calmes and Louise Story that also includes the Dodd version of events:

Mr. Geithner reiterated the Treasury position of that lawyers inside and out of government had agreed that “it would be legally difficult to prevent these contractually mandated payments.”

That position was being questioned at the Capitol. Congressional Republicans, eager to implicate Democrats, initially blamed Senator Christopher J. Dodd, the Connecticut Democrat who heads the banking committee, for adding to the economic recovery package an amendment that cracked down on bonuses at companies getting bailout money, but that exempted bonuses protected by contracts, like A.I.G.’s.

Mr. Dodd, in turn, responded Tuesday with a statement saying that the exemption actually had been inserted at the insistence of Treasury during Congress’s final legislative negotiations.

Something in the last couple of hours caused The New York Times to change the way it is reporting this matter so that it is no longer mindlessly reciting the false White House attempt to blame Dodd for the bonus exemption, but instead is at least including a version of the truth.



UPDATE III: I'm receiving email regarding the remarks Dodd made today on CNN in which he stated that, at the White House's insistence and over his objections, he agreed to include the pre-February, 2009 carve-out in the stimulus bill. Some of these emailers have suggested that Dodd's comments are at odds with what I wrote. They quite plainly are not.

The narrative I wrote here (and which Hamsher wrote in her post) both included exactly that sequence:

That was the exact provision that Geithner and Summers demanded and that Dodd opposed. And even after Dodd finally gave in to Treasury's demands, he continued to support an amendment from Ron Wyden and Olympia Snowe to impose fines on bailout-receiving companies which paid executive bonuses."

I explicitly wrote that it was Dodd who, after arguing vehemently against this provision, ultimately agreed to its inclusion. And the statement from Dodd's office that I quoted above included the same series of events ("Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made, including adding the exemption"). That's exactly what Dodd said today on CNN.

The point was -- and is -- that Dodd was pressured to put that carve-out in at the insistence of Treasury officials (whose opposition meant that Dodd's two choices were the limited compensation restriction favored by Geithner/Summers or no compensation limits at all), and Dodd did so only after arguing in public against it. To blame Dodd for provisions that the White House demanded is dishonest in the extreme, and what Dodd said today on CNN about the White House's advocacy of this provision confirms, not contradicts, what I wrote.



UPDATE IV: From the CNN article on the Dodd interview:

Dodd acknowledged his role in the change after a Treasury Department official told CNN the administration pushed for the language.

Both Dodd and the official, who asked not to be named, said it was because administration officials were afraid the government would face numerous lawsuits without the new language. . . .

I agreed reluctantly," Dodd said. "I was changing the amendment because others were insistent."

It was the Treasury Department -- at least according to a Treasury official granted anonymity for the extremely compelling reason that he "asked not to be named" -- that pushed for the carve-out, and did so over Dodd's objections. That was the point from the beginning. That's precisely what made it so outrageous that the administration was trying to blame Dodd for a provision which Obama's own Treasury officials advocated, pushed for and engineered.

Anyone who doubts Dodd's opposition should just go read the above-excerpted articles which reported contemporaneously about the dispute Dodd was having with the White House over the scope of the compensation limits. For obvious reasons, those real-time accounts are far more instructive about what really happened than what the parties are saying now that everyone is trying desperately to avoid blame for the politically toxic AIG bonus payments.

-- Glenn Greenwald

http://www.salon.com/opinion/greenwald/