American International Group, an insurance company that has received
about $180 billion in taxpayer funds, last week paid $165 million in
bonuses to executives whose bad judgment is largely responsible for the
financial mess we're in.
Sen. Chris Dodd (D-CT), the Chairman of the Senate Banking Committee,
wants the government to take back the bonuses. This is a change of
heart for Mr. Dodd, because it was he who inserted in the "stimulus"
bill an amendment which specifically protected from restrictions on
executive compensation "contractually obligated bonuses agreed on or
before Feb. 11, 2009."
The amendment applied principally to AIG.
This apparent hypocrisy was not helpful to Sen. Dodd, who has been
criticized for receiving a cut rate loan from Angelo Mozilo, CEO of
Countrywide Mortgage, one of the worst of the subprime mortgage lenders,
and for his purchase of a $160,000 Irish "cottage" with the assistance
of an insider trading felon for whom Sen. Dodd had arranged a pardon.
Why might Sen. Dodd have been so solicitous of the welfare of the AIG
execs? Perhaps because last year he was the single largest recipient of
contributions from American International Group's political action
committee and its employees, $103,100, according to opensecrets.org,
which derived the information from Federal Elections Commission records.
The second largest recipient of AIG largesse? Barack Obama, $101,332.
Sen. Dodd says the language in the stimulus bill was the Treasury
department's idea. Treasury is saying Secretary Geithner didn't learn
of the bonuses until March 10, and didn't tell President Obama about
them until March 12.
It's difficult to say whether it would be worse if Secretary Geithner
were lying, or if he is telling the truth. Let's assume he's telling
the truth. The Wall Street Journal reported March 1 Treasury had
approved the release of an additional $30 billion in Troubled Asset
Relief Program (TARP) funds for AIG. Even in the Obama administration,
$30 billion is still real money. How could the Treasury secretary have
approved of an expenditure of that magnitude without knowing what the
money would be spent on? Is anybody minding the store?
Associated Press reporter Julie Hirschfeld Davis suggests Mr. Geithner
may be more dishonest than inept:
"For months the Obama administration and members of Congress have known
that insurance giant AIG was getting ready to pay huge bonuses while
living off government bailouts," she wrote Tuesday. "It wasn't until
the money was flowing and news was trickling out to the public that
official Washington rose up in anger and vowed to yank the money back."
A billion is a thousand million. Some suspect the belated sturm und
drang in Washington over the $165 million in bonuses is an effort to
distract attention from what AIG did with the thousand times more money
it received in federal bailout funds.
AIG released last Sunday (March 15) a list of its counterparties (the
firms to which it owes money). These were major European banks, plus
U.S. giants Goldman Sachs, Bank of America, JP Morgan Chase, Morgan
Stanley. There may be a good reason why these financial giants
especially the foreign financial giants should be made whole at the
expense of taxpayers who've lost about 40 percent of their life savings
thanks in large part to the machinations of these financial giants, but
to date, no one in Washington has offered it.
"The AIG bailout has been a way to hide an enormous second round of cash
to the same group that had received TARP money already," wrote former
New York Gov. Eliot Spitzer in Slate Tuesday. "AIG was nothing more
than a conduit for huge capital flows to the same old suspects, with no
reason or explanation."
Perhaps there's a hint of an explanation in this: Employees of Goldman
Sachs contributed $955,473 to the Obama campaign. Employees of
CitiGroup contributed $653,468; employees of JP Morgan Chase, $646,058;
employees of Morgan Stanley, $485,823.