Congress is rushing to respond to the widespread public outrage over the $160 million in bonuses paid to American International Group (AIG) executives with taxpayer money. The most popular idea is to tax the bonuses, but such a retroactive tax would raise very serious legal questions. I discussed this issue on Countdown in this segment.
New York Attorney General Andrew Cuomo has revealed that AIG paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company. President Obama and members of Congress have expressed outrage even though they crafted the legislation that allowed for this money to be given in bonuses.
The AIG contracts were written in March 2008, so the obligations were known to AIG when it was negotiating with Congress and it does not seem that, at the time that the contracts were signed, AIG could make good on these obligations. Under the contracts, these executives were guaranteed 100 percent of their 2007 pay for 2008, regardless of their performance. It seems precisely the type of policy that led to this company imploding — performance of the executive is irrelevant to their compensation.
Yet, Congress was dealing with a group of executives that had shown little business judgment and considerable greed in their destruction of their own company. Yet, Congress saw fit to give these same people hundreds of billions of dollars and then express shock that they acted precisely in the same way with the public funds. It is akin to giving money to the Pirates of the Caribbean and then express surprise that they blew the money on women and grog. After these are men who toast ” “Take whatever you can and give nothing back” (To avoid any understandable confusion, there was the Pirates not the AIG executives).
The bonuses made be defended on a provision expressly put into the $787 billion stimulus last month by Sen. Christopher Dodd who provided for “exception for contractually obligated bonuses agreed on before Feb. 11, 2009.” Dodd has been attacked because he is reportedly to have been the largest recipient of donations from AIG executives. I do not believe that Dodd’s contributions from AIG officials influenced him, though once again I have serious problems with members receiving contributions from regulated parties and firms. However, the more intriguing issue is the question of who is to blame for the inclusion of this language. Glenn Greenwald, who is a well-respected and insightful columnist, has come to Dodd’s defense. He writes:
That is simply not what happened. What actually happened is the opposite. It was Dodd who did everything possible — including writing and advocating for an amendment — which would have applied the limitations on executive compensation to all bailout-receiving firms, including AIG, and applied it to all future bonus payments without regard to when those payments were promised. But it was Tim Geithner and Larry Summers who openly criticized Dodd’s proposal at the time and insisted that those limitations should apply only to future compensation contracts, not ones that already existed. The exemption for already existing compensation agreements — the exact provision that is now protecting the AIG bonus payments — was inserted at the White House’s insistence and over Dodd’s objections. But now that a political scandal has erupted over these payments, the White House is trying to deflect blame from itself and heap it all on Chris Dodd by claiming that it was Dodd who was responsible for that exemption.
For the full column, click here. Glenn bases his research on Jane Hamsher’s column at Firedoglake, another highly trusted source. I trust both views on such matters and I certainly accept their account that Dodd did not suggest this change. There remains the question of why Dodd and his colleagues allowed the language to be included. They are, after all, the people who pushed through and passed the legislation. Nevertheless, the blame cannot be placed entirely at the feet of Dodd who appeared to pushed back against the change by the Administration. If there is blame, it is the decision not to fight more aggressively in opposing the bill without sufficient limitations. The story does demand answers from the Obama Administration.
The amendment made it into the final version of the bill, and is law.
I, however, do not see how Congress can make this cat walk backwards with a simple tax bill. This smacks of a bill of attainder if directly at one or two companies. There may be a question of fraud in the drafting of these contracts. Moreover, there is considerable questions raised by bonuses paid by Merrill Lynch. In a letter to Rep. Barney Frank, Cuomo writes:
I was taken to task for saying on Countdown that Dodd was responsible for the amendment. However, Dodd has now admitted responsibility for the amendment.
On October 29,2008, we asked Merrill Lynch to detail, among other things, their plans
for executive bonuses for 2008, including the size ofthe bonus pool and the criteria they planned
to use in detennining what, if any, bonuses were appropriate for their top executives. On
November 5, 2008, the Board responded and stated that any bonuses would be based upon a
combination of perfonnance and retention needs. However, Merrill did not provide my Office
with any details as to the bonus pool, claiming that such details had not been detennined.
Rather, in a surprising fit of corporate irresponsibility, it appears that, instead of
disclosing their bonus plans in a transparent way as requested by my Office, Merrill Lynch
secretly moved up the planned date to allocate bonuses and then richly rewarded their failed
executives. Merrill Lynch had never before awarded bonuses at such an early date and this
timetable allowed Merrill to dole out huge bonuses ahead of their awful fourth quarter earnings
announcement and before the planned takeover of Merrill by Bank of America.
Merrill Lynch’s decision to secretly and prematurely award approximately $3.6 billion in
bonuses, and Bank of America’s apparent complicity in it, raise serious and disturbing questions.
The AIG bonuses are equally staggering. The top individual bonus was more than $6.4 million, and the top seven received more than $4 million each.
For the full story, click here
Jennifer:
“I may make a point of nightly “From the Obama SCHMARTS Department” updates just for you.”
*****************
It is the wise man who accepts adulation from even the most foolish of devotees. Proving my point with your words is incredibly thoughtful of you. Update away!
It’s a common troll tactic to come on very strong, almost insane (like our dearly deleted gary) and then have someone clothed with the “appearance” of reasonableness – usually themselves – come along and express agreement in sentiment but moderate the tone. When the second is called out (usually for weak logics or blatant untruths), they’ll escalate to traditional trolling again such as ad hominem nonsense and unattributed Newspeak, er, GOP talking points, um, “information”. It’s a propaganda technique I like to call “generating false consensus”. Tactically it gives the illusion of numbers. It can have the secondary effect of appealing to the lunatic fringe the Right is so dependent upon. Fortunately most paid trolls – and it’s usually the pros who adopt this tactic – aren’t smart enough to make it work very well. I’d tell you how you went wrong in execution, but I don’t help the enemy during wartime unlike your boys Bush and Cheney.
But selecting mespo as a target? tsk tsk tsk
How very out of your league you are. Enjoy your pending smack down, oh trollish one. I know I will. I now return you to your regularly scheduled trolling, which will likely contain some kind of personal attack, begging to prove a negative or some other equally weak crap.
Jennifer Grant:
Your loyalty and perseverance are extraordinary but about in keeping with the typical semi-Republican, semi-Democrat mentality. You just want it right, and you want it right now — and not too hot, and not too cold. My, how juvenile. Anyone who can’t see we’re weaning ourselves from the Big Bush DeBacle isn’t looking, and if you expect perfection you’d best look in your Church–oh sorry, that won’t work either. Tsking gary won’t make you feel any better either, because after all you want what you want and you want it now. Please quit stamping your feet and holding your breath it makes you look purplish red! The adults are trying to hear what our first adult President in quite some time has to say. We may indeed “survive” Obama, but our immature and cowardly fellow citizens racing about like Chicken Little, or George Bush & the neocons post 9-11, well I’m not so sure. Grow up and quit whining.
It looks like the Troll family has gone on steroids and the result is Gary. Jennifer, don’t take Gary seriously. By the way, the crisis that you are lamenting was started under Republican control and your suggestion that we will “survive Barack Obama” ignores the facts of who he ran against and what changes have already been made and the improvements that have been made. I would prefer if AIG was in receivership, but until that happens we need to do what is necessary to save as much money as possible. If torture is legal, a little retroactive tax must be ok.(only kidding, Professor)
Nice trolling tactic that. Still won’t work.
Gary, settle down. I can assure you that many of us that thought we were doing the right think by supporting Barack Obama last November are now admitting we made a huge mistake.
Do not take our slowness to come to publicly decry what this new administration has been pulling for the last 40 days as being unpatriotic. I can assure you that in millions of homes across America good solid citizens are coming to a realization that a mistake was made last November.
It is very hard for those of us that felt punished with 8 years of President Bush to come to the realization that there is a possibility a far worse President was just elected. One who was not truthful about who he was when he campaigned and one who continues the daily campaign when he is suppose to be leading.
We now have nations laughing at us. Our soldiers are in a war in Afganistan that this President has no intentions of winning, which makes him an immmoral man to send soldiers out to risk their lives in a war he has no intent on winning.
Gary, please calm down. We are rational. We realize a mistake was made in November. We will survive Barack Obama.
You know if you rearrange the letters in gary’s name you come up with ray-g. Seems fitting.
Wouldn’t the “70 BILLION of American taxpayer money AIG floated to them” have come from the TARP funds given to AIG by the Bush administration?
Use of Direct Support to AIG from 9/16/08-12/31/08 (.pdf)
gary,
You are truly swine before pearls. That’s some of the most pitiful trolling here yet. I’m betting you spell your last name “Filistine”.
Just to add another link in Dodd’s defense: http://www.salon.com/opinion/greenwald/2009/03/17/dodd/index.html
It seems like the Obama administration intended to let this fly and now that there’s a controversy, they need a scapegoat to take the fall to divert criticism away from themselves and are cooping the conservative noise machine to achieve just that. Dodd appears to be the unfortunate fall man.
gary:
Quit screaming. It’s making us think you actually have something constructive or interesting to say.
I listened to the BBC World on this issue tonight. Their commentator pointed out that this is, in many ways, a distraction from the very large economic problems which are not being addressed. I see this as the Roman circus as well. While these bonuses should be taken back, legally, this can’t become a smoke screen to hide the inadequate response of our govt. to the economic crisis we face. (Paul Krugman, among others has stong words on this point.)
FDL has another view:
Treasury Attempts to “Blame Dodd” for AIG Bonuses
I too am looking forward to JT on KO tonight; but heads up Media Matters has a different take on that amendment by Senator Dodd.
http://mediamatters.org/items/200903170026?=h_top
Wow….
An executive who helps run a company into the ground is a “talent” worth a few million??
Why didn’t I recieve an “A” in my home economics class back in high school when I burned my cake? After all, I did make the cake. So what if it burned? I think I should have gotten an “A” instead of a “B”. Where were those people when I needed them to justify why I deserved an “A”?
I say tax them 110%. The extra 10% is for being greedy little bastards
I am looking forward to Prof. Turley’s comments this evening, but I believe that the legislation would be an unconstitutional taking. It is also bad policy. Despite the populist furor over the bonuses, a quick and dirty law to satisfy the outraged masses smacks a bit of festivities in the Roman Coliseum. It is also a rather cynical way for Congress to try to cover its a** after the fact.
Mr. Turley, please do us the favor of explaining how 1) Chris Dodd put the bonus exemption for AIG in the Stimulus Bill and 2) Barack Obama signed the Stimulus Bill yet 3) each of them goes on TV and expresses phony shock about them.
Also, could you tell me if it was Constitutional for AIG to get 170 billion in bailout and then for them to turn around and use 60 BILLION of it to pay off their obligations to FOREIGN BANKS?
How about them using bailout money to turn around and then pay off Goldman Sachs, etc at 100% on the dollar?
We have 535 thieves in Washington DC…and not even Jonathan Turley will call them out…since the DEMOCRATS are in charge of the thievery.
GOP leads on Rasmussen’s generic ballot for first time in years
The latest Rasmussen Reports national telephone survey found that 41% said they would vote for their district’s Republican candidate while 39% would choose the Democrat.
Investors (Gary is that you?) now favor Republicans by a 46% to 36% margin, while non-investors would vote Democratic by a 45% to 33% margin.
http://washingtonindependent.com/30539/rasmussen-the-only-poll-that-matters
Thank you for standing for the rule of law. I’m quite certain there is a legal way to stop or retrieve these bonuses. I think Congress may be picking the way that leads to the most stalling so their BFFs will get the money in the end. Neither Congress nor the president has gotten the memo on “we’re a country of laws”. It’s significant that each branch would like to keep violating our laws to accomplish their aims. This should be called out in no uncertain terms.