Monday, March 23, 2009

Democrats Need Extra Credit for the Bonus Problem

So apparently our fearless Democratic Party leaders have such a short memory – and such high morals – that they can't remember saying it was ok to pay out taxpayer money to the executive team of a company – AIG – that helped run the company into the ground.

But that's not quite how it's being spun in the news. No, it's more of a "mob mentality" towards AIG - until Chris Dodd said that both he and the Obama administration knew about the bonus payouts and OK'ed them. Now it's moved from "hang them by the balls" to a more "let's move on and make sure it doesn't happen again."

And we all thought Bush was stupid. But apparently the media, the Obama administration, and others think WE are stupid.

Let's set the stage for what happened:

AIG says that it will pay out to executives $165 worth of bonuses. This is followed up with the Obama administration officials and Republicans nearly universal in condemning the $165 million in bonuses.

On March 16, Obama asked "How do they justify this outrage to the taxpayers who are keeping this company afloat?" Treasury Secretary Tim Geithner, who had known about the bonuses, was also trotted out to express his "outrage" and declare that Treasury would somehow try to claw back the bonuses.

Later that night, Chris Dodd comes up with the brilliant – and may I add possibly unconstitutional and illegal – post-payout special tax on the bonuses. Within hours, most all Democrats and with a split Republican party, the idea spread to both houses of Congress, with lawmakers proposing an AIG bonus tax.

Soon, it became apparent that maybe these payments were known to the Democratic party leaders. The provision, now called "the Dodd Amendment" by the Obama Administration provides an "exception for contractually obligated bonuses agreed on before Feb. 11, 2009" - which exempts the very AIG bonuses Dodd and others were seeking to tax.

Dodd's original amendment did not include that exemption, and the Connecticut Senator denied inserting the provision, saying: "I can't point a finger at someone who was responsible for putting those dates in. I can tell you this much, when my language left the senate, it did not include it. When it came back, it did."

So he didn't know that something like that would be in the bill that he was writing? Surely, that was a pretty important fact not to be missed…then forgotten about when the word leaked out about this one specific bonus. (As a side point – how many other bonuses will be paid out under this framework? And at what cost to me and you?)

But one other thing. I'm not making any accusations, but merely noting this for the future…in case a trend appears to show up: Sen. Dodd was AIG's largest single recipient of campaign donations during the 2008 election cycle with $103,100. Also, one of AIG Financial Products' largest offices is based in Connecticut.

So apparently some people, but obviously not Dodd, knew about the OK to pay out bonuses to companies that received bailout money. Bailout money approved under the Obama administration. So forgive me for beating this subject to death, but wouldn't have someone had told someone that they put this clause into the bailout plan? It seems nobody seemed to tell Dodd or the President – and by assumption his chief advisor, the Vice President, his cabinet members, or his wife –Obama went on to express outrage at the use of federal bailout money to pay $165 million in bonuses to AIG employees and ordered the Treasury Secretary to use all legal means to prevent the payments.

Maybe I should also add a link to a previous blog post of mine, entitled "Incompetent, or Just Plain Stupid?"

But now with the apparent revelation that this was actually approved by the Democratic leadership has the Democratic leaders now saying "let's move on and make sure it doesn't happen again."

Joe Biden's economic adviser warned that a congressional plan to tax AIG executives' bonuses may go too far in using the tax code as a tool for retribution. Currently, President Obama has not said whether he would veto some version of a House-backed plan to heavily tax the $165 million in bonuses. And now many Democratic and some Republican leaders are saying things along the lines as no one disputes that paying out those bonuses given the country's current predicament was inappropriate and distasteful, contract or no. But the legislative proposals on the table to rectify the situation may end up doing more harm than good in the broader scheme of things.

Last week's angry-mob-with-pitchforks approach to bonuses
paid by AIG may give way to a more pragmatic approach this week as lawmakers and investors weigh the potential risks of the proposals before them.

At least Democrats haven't told us to eat cake yet.


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