The Washington Post reports that the recent revelations about AIG paying executives $150 million in bonuses, after receiving $170 billion in taxpayer funds, have caused an outrage among the public and members of Congress, threatening to diminish Pres. Obama’s legislative clout:
President Obama’s apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.
Politicians in both parties flocked to express outrage over $165 million in bonuses paid out to executives at the company, demanding answers from the president and swamping yesterday’s rollout of his efforts to spark lending to small businesses.
The populist anger at the executives who ran their firms into the ground is increasingly blowing back on Obama, whom aides yesterday described as having little recourse in the face of legal contracts that guaranteed those bonuses.
White House press secretary Robert Gibbs, peppered with questions about why the president had not done more to block the bonuses at a company that has received $170 billion in taxpayer funds, struggled for an answer yesterday afternoon. He explained that government lawyers are “looking through contracts to see what can be done to wrest these bonuses from their recipients.”
Obama himself sought to channel the public’s sense of disbelief yesterday. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” he said, declaring the bonuses an “outrage” that violate “fundamental values.”
White House aides grasped for actions that could soothe sentiment on Main Street and in the halls of Congress, where the fate of the new president’s sweeping agendas on health care, climate change and education will be decided. They suggested that the government will use its latest pledged installment of $30 billion for the ailing company to recover the millions in bonuses paid Friday.
House Minority Leader John A. Boehner (R-Ohio) said the bonus issue added to his belief that there will be almost no Republican support for any expansion of a bank-bailout program that passed Congress last fall with broad bipartisan support.
It wouldn’t surprise me if Obama tried to shift the blame for this mess to Bush. Regardless, we can only hope that this incident will indeed weaken Obama’s political capital.
On the same topic, the honorable Chris Dodd has suggested levying an “AIG bonus tax”:
Senator Chris Dodd (D-Conn.) on Monday night floated the idea of taxing American International Group (AIG: 0.9322, 0.1521, 19.5%) bonus recipients so the government could recoup some or all of the $450 million the company is paying to employees in its financial products unit. Within hours, the idea spread to both houses of Congress, with lawmakers proposing an AIG bonus tax.
The move represents somewhat of an about-face for the Senator.
While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” — which exempts the very AIG bonuses Dodd and others are now seeking to tax.
The amendment made it into the final version of the bill, and is law.
Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.
Dodd, hurting politically, clearly wants to save face and distract the public from the fact that has such a close relationship with AIG, not to mention Fannie Mae and Freddie Mac. The GOP really needs to field a strong challenger to Dodd’s seat, in order to remove this embarassement from Washington.
March 17th, 2009 at 3:16 pm
I may be the only citizen, other than the AIG people, who feels that there is nothing that can be done and that it is illegal to break a contract. They’d probably end up owing more in the lawsuit than it would to just pay out the bonuses. Just because it may be “morally” right to not accept the bonus…it was still in their contract and they have every right to accept it…I would!!! Dodd’s and Reid’s and Obama’s AIG Bonus Tax plan is just another possible Government intervention that should never have come to pass…a creeping, quasi-socialism.
March 17th, 2009 at 3:21 pm
[...] Oh, to have a Democrat Senator’s luck! [...]
March 17th, 2009 at 3:23 pm
An interesting question was posted on Washington Post recently:
“Why are AIG’s bonus contracts sacred, but GM’s contracts with hourly workers the first thing they try to get rid of?”
What do people think?
March 17th, 2009 at 3:40 pm
JayPe, I believe a contract is a contract. There is a time for renegotiating and that is when the term limit of the contract is over. Isn’t a “right” just as basic of an idea as a “contract?” If our Government starts following the notion that contracts can be ignored, who is to say that our rights can’t be ignored? Why should I or you or anyone else pay their debts if the Obama Administration and the Democratic Congress don’t believe that AIG or others are obligated to pay their debts. Now I can understand enacting into law that future “bailout” moneys cannot go towards bonus payments but that isn’t the case in this instance…so they should pay. IMO.
March 17th, 2009 at 3:41 pm
How about we levy a Tim Geihtner tax or a Chris Dodd tax for their roles in this boondoggle.
March 17th, 2009 at 3:44 pm
Levying a tax on the recipients of the AIG bonuses is an extremely dangerous idea. It sets the precedent for the government to levy taxes on anyone they want to as a punitive measure, thus usurping the powers of the courts.
March 17th, 2009 at 3:45 pm
Jersey, the point is that GM’s contracts were renegotiated when it became clear that that was one way that GM could stay afloat and preserve jobs. However, AIG’s contracts (incl. bonuses) are not being rengeotiated, because the company is already stuffed and being propped up with taxpayer funds.
Hardly seems fair does it?
March 17th, 2009 at 3:47 pm
I think its comical to complain about the 150 million bonus payment…which is really dumb thing for them to do…but hello, the govt gave AIG 160 billion which was funneled out to 3rd parties. How about Goldman Sachs give back the 12 billion they took through the AIG bailout, now that is some $ to complain about + who approved that bailout…that could be some scandal or at the very least a good book for somebody to write/speculate about:
http://www.minyanville.com/articles/index/a/21657/from/yahoo
March 17th, 2009 at 3:51 pm
JayPe, I understand and that is a different scenario because both parties agreed to renegotiate. The whole “bailout” or buyout isn’t fair.
March 17th, 2009 at 3:56 pm
The Rnc need to find a candidate to send chis DODD HOME! feel sorry for voters in CT!
March 17th, 2009 at 3:56 pm
Jaype, there are plenty of examples where companies in trouble break contracts, or force concessions/renegotiations under threat of bankruptcy. I don’t see why we shouldn’t have the same standard play across the board.
March 17th, 2009 at 4:25 pm
It seems to me the difference is that the union contracts are being renegotiated because the union leader are willing to do so. Of course they are not crazy about the idea, but they are doing it in the interest of job security. In the case of AIG, there is not pressure on any of them to give up what they have because they have already been bailed out. It should have been discovered during the hearings and the government would have had the leverage to tell them redo them, or else. Its too late now. The government can do nothing about it without completely distroying a major pillar of our economic system. Bottom line is that this is a distraction. The Democrats are using it to distract from the fact that their whole bailout/stimulus allocations are falling on their face and will cause huge problems down the road.
Its less than one percent of the money.
March 17th, 2009 at 4:32 pm
I think that AIG should be held to the same standard as GM. Tell them to renegotiate their contracts like GM union leaders did, and if they don’t then the government money may be harder to get.
The problem was that the money was gained before the contracts were renegotiated.
March 17th, 2009 at 4:46 pm
#13, absolutely, in terms of consideration for any future money, you’re right about that.
March 17th, 2009 at 5:05 pm
Off Topic:
ACORN will perform 2010 Census!!!!!!!
http://www.foxnews.com/politics/2009/03/17/lawmakers-concerned-role-acorn-census/
March 17th, 2009 at 5:11 pm
As the Stock Market continues to decline, so too will Obama’s poll numbers setting the GOP up for massive gains in 2010 and 2012.
March 17th, 2009 at 5:19 pm
#15 – very troubling. Acorn is nothing but a bunch of crooks and should ALL be in jail. I mean that sincerely.
March 17th, 2009 at 7:40 pm
#15, that is really awful. What’s next, taking the vote away from anyone who hasn’t committed a felony?