GOPers and Dems Compete Over Who Can Seize Back Bonuses Faster
Washington's most powerful lawmakers are morphing into kitchen-table populists this morning with neck-snapping speed, as the House prepares to vote on a bill that would slap a 90% tax on AIG's infamous executive bonuses.
Republicans, while openly wavering on whether their anti-tax creed would allow them to back the AIG tax bill, are pushing an alternative plan crafted by two of their freshmen, Leonard Lance (NJ) and Erik Paulsen (MN).
The GOP bill would force a recouping of 100% of the AIG bonuses -- and the party clearly smells blood in the water as Sen. Chris Dodd (D-CT) becomes a scapegoat for the executive-pay debacle. Here's how House Minority Leader John Boehner's (R-OH) describes the Lance-Paulsen bill this morning:
Let's be honest. The legislation House Democrats are bringing to the floor today, which they claim is the best way to recover the AIG bonuses, is a sham. In a perfect world, it would lead to partial recovery of the bonuses a year or more from now - when the executives get around to paying their income taxes. And because the legislation is so riddled with loopholes, it wouldn't even lead to the recovery of all of the bonus dollars.How is that a fair deal for taxpayers?
Don't taxpayers deserve to get 100 percent of their money back?
After all, they aren't responsible for the AIG executives getting the $165 million; Democrats in Congress and the Administration are. They're the ones who rushed through the trillion-dollar "stimulus" spending bill that allowed the bonuses to be paid in the first place.
In reality, the AIG bonuses were agreed to in the first quarter of 2008, and it's not clear whether Dodd's concessions to the Treasury Department on his CEO-pay amendment would have made any difference in getting the money back. Meanwhile, an amendment that would have punished AIG for its free spending, from Sens. Ron Wyden (D-OR) and Olympia Snowe (R-ME), was turned back by the administration during conference talks on the stimulus.
Josh
Matt
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Brian
Can we see a list of who got lobbied by and who got political contributions from AIG or it's subsidiaries over the past 10 years?
While there's little doubt both parties benefited, it might be revealing to see where the bulk of that "investment" went.
March 19, 2009 11:41 AM | Reply | Permalink
Probably all you need to know about political contributions by AIG employees is here:
http://www.opensecrets.org/orgs/summary.php?id=D000000123
As you can see as you look at this historical data, as the power shifted from Dems to Republicans then back to Dems, so did the political contributions. Obama and Dodd were the top two recipients (Obama is listed as #1 today but was #2 yesterday...not sure what changed) and McCain was #3. Again, as usual, in a presidential election year the two candidates are going to get a lot from the employees of big companies like AIG and the expected winner will get more.
The AIGFP breakdown, which you can see under the affilates tab, looks bad for Dems as a huge chunk of the contributions from employees of that division went to Dems in 2008. Cassano maxed out his individual contributions for Obama. (and did the same with Dodd in 2006) But former-CEO Hank Greenberg, under whom this whole mess started, has always given a big chunk of his change to Republican candidates. And current CEO Liddy is a Republican who historically contributes to GOP candidates.
I'm seeing chanting on some blogs that Obama is a hypocrite for taking this money and should give it back. Those comments show a woeful lack of knowledge about campaign finance law. Corporations can contribute directly to candidates and there is a pretty low limit on how much PACs affiliated with a company can contribute. Regardless, OpenSecrets shows that all of the contributions came from individual employees, not PACs. There are too many people out there who think that the AIG board got together and voted to give tens of thousands of dollars to Obama and Dodd in exchange for political favors.
March 19, 2009 12:10 PM | Reply | Permalink
Yeah, the trick of grouping donations by employer and saying the company directly gave cash to a candidate has been going on since these sites were created.
March 19, 2009 12:29 PM | Reply | Permalink
The above should have read, "Corporations CAN'T contribute..." Big difference.
March 19, 2009 12:40 PM | Reply | Permalink
So how is this bill supposed to work? Are they wanting to simply deduct the relevant sum from the next bailout payment to AIG while letting the sharpies keep their bonuses?
March 19, 2009 11:47 AM | Reply | Permalink
The proposed "tax the bonuses at 90%" legislation - or whatever it is - is silly, reactionary, populist BS that won't solve a thing. It may score some cheap political points but that's it. I'm a bit ashamed that this is the Dems answer to this mini-crisis/non-crisis.
The GOP alternative is basically "Treasury has to approve all future bonuses". Not much better but I have to say it's better than the Dem proposal. Doesn't draw any blood, though, so public support for it will probably be neglible. (not because it's bad but because it doesn't result in anybody's head on a spike)
The only positive here is that most angry American voters probably like the idea of taxing these fat cats out the wazoo. But it's like the death penalty - it only delivers vengeance but does nothing to solve the larger problem. Whatever the case, I can see pissed off voters being behind the idea - and it will force GOPers to either vote for a tax increase (a stupid one, mind you, and probably unconstitutional) or vote against legislation that probably has a lot of public support.
I still fail to see how the government - which owns 80% of AIG on behalf of taxpayers - can't just tell AIG to, well give it back. And if they can't get it back from the employees in AIGFP who received the money, get it from somewhere else. Timmy needs to put his foot down and Obama needs to back him up 100%. Both would help themselves a lot if they took a tough stance here. And if AIG refuses, well, just make it that much harder for them to get additional payments of corporate welfare from the government.
I really hope Obama and the Dems use this as an opportunity to push needed regulation through Congress. The lack of regulation on these CDS and MBS products and the fact that these companies really are "too big to fail" is the larger issue here - and that's an issue that you can pin on the deregulators in the GOP.
March 19, 2009 11:52 AM | Reply | Permalink
I still fail to see how the government - which owns 80% of AIG on behalf of taxpayers - can't just tell AIG to, well give it back.
From what I understand is that the agreement was for government to have majority ownership without the controlling interest. It could be that the government has shares in preferred stock not common stock.
March 19, 2009 11:59 AM | Reply | Permalink
Bankruptcy has well-defined laws. A government rescue doesn't have this sort of case law. This is what Obama was referring to yesterday when he said that more tools were needed that are legal and well-defined.
Congress needs to lead in this effort, but is that what we're seeing today? I will submit we are seeing panderers to a mob reaction and that's annoying since we aren't a damned banana republic in spite of the best efforts by the previous administration to put us there.
Instead of Congress focusing on a populist clawback of this money, I would prefer seeing discussion of changes in TARP that perhaps nullify contracts if a government rescue is necessary and makes it part of any future rescues. Is this what is happening?
March 19, 2009 1:29 PM | Reply | Permalink
While the 90% tax on the bonuses is really just a symbolic gesture, its actually a neat little political ploy on the part of the Democrats. How, you ask? Simple. It forces the GOP to either honor their anti-tax creed and go against populist rage, or to flip-flop and anger the base.
As per usual, the GOP is damned if it does, damned if it doesn't
March 19, 2009 11:57 AM | Reply | Permalink
As you can see from my comments above, I agree. But I still think the proposed legislation is reactionary, populist BS and just as much a distraction as this whole issue itself. We're trying to fix a pinhole leak while ignoring the huge gash the iceberg just tore through the hull. TPM was doing great work on investigating which firms were getting backdoor bailouts via AIG. The traditional media was starting to pick up on this as well. Now it's all bonuses, all the time.
One question I have - in the years to come, how much are we going to find out about just how complicit Goldman Sachs was in this whole disaster? And I'm not just talking about this silly bonus stuff.
March 19, 2009 12:15 PM | Reply | Permalink
Exactly! Can't have the public looking at the real big fish ... crucify the underlings! Is it any wonder that Cramer's own NBC family has been leading the charge?
The biggest payment we're talking about here is $6.4 million. RU serious?!? These are the masters of the universe that brought down the economy?? Ha! These are the people who could do what they were told or be fired: exactly the sort who are expendable and perfect for bag-holding.
March 19, 2009 12:29 PM | Reply | Permalink
"... Meanwhile, an amendment that would have punished AIG for its free spending, from Sens. Ron Wyden (D-OR) and Olympia Snowe (R-ME)..."
Are you Wyden's press agent? How exactly would a 35% tax have "punished" AIG?
Stop the drinking the friggin' KoolAid when opportunistic politicians claim their bill, their amendment, their flaky idea would have solved the problem.
Here's a suggestion: Ask a few piercing questions before you repeat gibberish.
March 19, 2009 11:59 AM | Reply | Permalink
Nate tackles the whole AIG "bonus" issue -
http://www.fivethirtyeight.com/2009/03/why-aig-paid-bonuses.html
March 19, 2009 12:21 PM | Reply | Permalink
True.
Incidentally, since every human with a brain in the world knows that aig is insolvent, why not just put them in chapter 11? Why not do chapter 11 to get out of these contracts? Or, why not pass a law that has the same effect? That would be the way to deal with the problem.
March 19, 2009 12:29 PM | Reply | Permalink
I think everybody is spooked because of what happened after Lehman was allowed to fail. If we want to go that route, it has to more controlled, more structured. I have no idea if this is even possible but government should looked in to separating AIGFP from the larger firm, put AIGFP into receivership, and clean up the mess. Again, I don't even know if that is possible. And we're not starting to hear rumblings that AIG's traditional insurance business may not be as "sound" as we've been led to believe.
March 19, 2009 12:44 PM | Reply | Permalink
I agree about the lehman issue. In hindsight, they obviouslys should never have let one of the top competitors of goldman sachs collapse. Hmmm, makes you wonder.
I am willing to bet the farm, that has decreased in value by 40% over the last year, on the fact that the rest of aig isn't doing that rosy right now. Insurance is not something that people go out of their way to pay when they don't have enough money for the mortgage or to put food on the table.
I think that they are just trying to ride it out and hope for the best at this point. I don't understand why they don't copy some of the bankruptcy laws and write them into some type of law that is applicable to entities that are basically owned by the government. That would be the way to go on a temporary basis until the crisis is over.
March 19, 2009 1:05 PM | Reply | Permalink
We're thinking alike. From everything I've read, the rest of AIG is at least solvent. AIGFP is a millstone. Take over AIG, cut out AIGFP and shut it down. Sell/spin off the rest before everything goes to hell. Oh, yeah, and fire everybody in AIGFP. Most took their "retention bonuses" and left anyway. If the others want to get jobs elsewhere, I bid them a cheerful adieu. They can't threaten to compete against AIGFP if it's gone.
March 19, 2009 4:00 PM | Reply | Permalink
I'll say this. Many of the individuals who received these incentives to stay on and unravel the derivatives aren't at fault I'm sure. It's the bozo that thought it would be a good idea to take such massive risks and then after everything blew up in his face, had to bribe everyone not to leave once he realized most everyone was going to get out of dodge once they realized the division was going to go under.
I think the bills going through Congress today are not a good thing. They are painting with a broad brush when they should be using a fine pen.
March 19, 2009 12:38 PM | Reply | Permalink
Nate fails account for one big reason why AIG might create this structure: these traders had detailed inside knowledge of AIG's exposures.
If that knowledge were taken into the market, it could have been used to trade quite effectively against AIG's liabilities (and still can). A big part of this I believe was protecting AIG from it's competitors who likely would profit at AIG's expense if they could put their hands on a couple of insiders.
It's also one reason why these guys are still being recruited despite the populist meme that they don't have employment options other than AIG. I don't think we really increased our chances of turning a profit through AIG with this week's nonsense ... but hey, we might get a portion of $160 million back!! Yay!
March 19, 2009 12:50 PM | Reply | Permalink
This is, perhaps, off-topic - so be it. While I cannot stand the idea of these bonuses and am in general outrages by the levels of compensation in any number of fields, what really angers me is the frenzy the media has managed to whip itself into over this issue. In the last week we have learned unequivocally that the U.S. has tortured, according to the agency empowered to make such a determination. From the MSM? Nary a whimper. Only John King wondering if the current president has made us less safe, in the opinion of the vice-torturer. Disgusting.
March 19, 2009 1:10 PM | Reply | Permalink