Bailout

Wall Street Traders Send Frustrated, Typo-Riddled Letter to Congress

Elana Schor | March 26, 2009, 3:27PM

Financial executives have spent so much time testifying before Congress these days that earlier this week, The Hill offered CEOs a Dos-and-Don'ts guide to staying on lawmakers' good side. Something tells me that the good folks at the Security Traders Association of New York (STANY) haven't read it.

In a letter to the Senate Banking Committee today, the STANY offers a hilariously hyperbolic plea for rejection of the 90% tax on bailout bonuses that the House passed last week. You can read the full letter right here, but here are some key passages ...

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John McCain

Did McCain Just Flip-Flop on AIG and Tweet-Flop on Its Bonuses?

Elana Schor | March 26, 2009, 2:09PM

Sen. John McCain (R-AZ) was in fine flip-flopping form during a speech today at the Heritage Foundation, as the Washington Independent reports.

"The problem started when we bailed out AIG," McCain told the conservative crowd at Heritage. "I would have let AIG go bankrupt. If they have to fail, they fail."

It's been well-noted in the blogosphere that McCain originally supported bailing out AIG in September, when his presidential run was in its, er, last throes. But what's most interesting, per the Independent, is that McCain came out against "controlling the salaries and bonuses of TARP-taking executives."

But I thought McCain wanted to let AIG fail exactly because that would deny bonuses to "greedy execs"! He told us so on his Twitter feed!* Sounds like it's time for some Straight Talk ^TM on AIG executives: Do we let the company fail to deny them bonuses, or let the company fail and make no attempt to prevent them from grabbing bonuses on their way out?

*This is the first and last time Twitter will appear in any of my posts.

Bailout

House to Take Up New Executive Pay Bill With Added Limits to Geithner's Power

Elana Schor | March 25, 2009, 10:18AM

The AIG-inspired plan to tax bonuses at bailed-out firms is stalling quickly in the Senate, but the House Financial Services Committee is pressing ahead today by taking up a bill that would freeze existing bonus contracts and require the Treasury Department to produce its own executive-pay standards.

But the measure, sponsored by Reps. Alan Grayson (D-FL) and Jim Himes (D-CT), doesn't leave the thorny decision on appropriate Wall Street pay to the Treasury alone. After Secretary Tim Geithner makes the call on what constitutes "excessive" compensation, the bill would require him to secure the approval of other financial regulatory agencies.

The House bill's limit on Geithner's ability to control the pay standards is admittedly slight, but it reflects a growing shift in the capital away from consolidating power in the hands of Treasury and the Federal Reserve.

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Barack Obama

Obama to Andrew Cuomo: Zing?

Elana Schor | March 24, 2009, 8:55PM

CNN's Ed Henry got an interesting response out of the president by suggesting that New York Attorney General Andrew Cuomo, who successfully pushed 15 of the top 20 AIG bonus recipients to give back their money, is getting more done on the executive-compensation front than the White House.

Obama avoided addressing the Cuomo comparison directly, but said that expressing a public opinion on AIG bonuses "took us a couple of days, because I like to know what I'm talking about before I speak." Is the implication, then, that Cuomo got out too far in front of the populist furor too quickly?

Bailout

Snowe: Obama Has 'Obligation' to Clarify Bonuses Stance

Elana Schor | March 24, 2009, 2:10PM

Centrist GOP Sen. Olympia Snowe (ME), whose support the White House is counting on to pass health reform, the budget, and climate change, offered a warning to President Obama today: Clarify your position on taxing bonuses at bailed-out companies, or risk losing more political capital.

"I think the president has an obligation to address this [and to] explain why he doesn't think this is necessary," Snowe told reporters today, referring to Obama's initial embrace of taxing bonuses -- which was followed days later by a pullback from his advisers amid questions about the measure's constitutionality.

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Bailout

Will Senate Slow the AIG Tax's Roll ... To A Halt?

Elana Schor | March 23, 2009, 11:20AM

Since TPMDC first noted on Friday that the Senate was putting the brakes on the AIG-inspired bonus taxation bill, the signs of a further slowdown are piling up.

As more banks warn that a broad bonus tax would drive them out of the open arms of the Treasury Department, even senior figures in the Obama administration are suggesting that the House's 90% levy on this year's bailout bonuses might not reach the president's desk.

But where does that leave the Senate, which aims to take up the bonus tax plan in the coming days? In a potential pickle, with must-get centrists such as Kent Conrad (D-ND) and Susan Collins (ME) cool to the idea and Majority Leader Harry Reid (D-NV) already facing a huge challenge in marshaling support for the White House budget -- which is scheduled for floor consideration starting next week.

Even House Financial Services Committee Chairman Barney Frank (D-MA) -- who is supporting a bonus tax bill that would impact far more companies than last week's AIG-inspired measure -- took a mushy line on the 90% tax yesterday, telling CBS: "I voted for the bill. I was not a major advocate for it."

If senior lawmakers keep coming down from last week's woozy, angry anti-AIG high, look for tomorrow's testimony from Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke to be more of a test of political capital for Geithner than an AIG frustration-fest.

Bailout

Senate Slows the AIG Tax's Roll, For Better or For Worse

Elana Schor | March 20, 2009, 5:34PM

As D.C. legend has it, George Washington told Thomas Jefferson that the Senate was designed as a saucer to "cool" the heat of House-passed legislation. Put another way, the Senate has a talent for helping bills grind to a screeching halt after arriving from the House, where the majority party has more power.

And this week's outrage-fueled AIG bonus tax is no exception. One day after the House passed a 90% retroactive levy intended to claw back bonuses at the infamous company, the future of the bill in the Senate remains less than clear.

The Senate version of the bonus tax is more measured than the House version, imposing a 35% tax on bonuses. But it also applies the tax to any company receiving more than $100 million from the bailout, while the House measure only applied to firms getting more than $5 billion. Several senior GOP senators, from Judd Gregg (NH) to Jon Kyl (AZ), have blasted the tax bill in recent hours, suggesting that Republican leaders may split on the proposal, just as they did in the House.

Could Republicans mount a filibuster of the bonus tax bill next week? Anything is possible in the current volatile political climate -- especially after today's revelation that the House bill would exempt $2.5 billion in hasty bonuses awarded last year at Merrill Lynch.

Ultimately, however, the political risk of appearing tolerant of AIG's bonuses is sure to push at least a few GOP senators over to the "yes" camp. Then the X factor becomes whether any Democrats will take the unpredictable route and raise questions about the bonus tax's constitutionality.

For an accurate reading of the tea leaves, check out this headline from Dow Jones (emphasis mine): "Sen. Reid: Senate Should Take Up AIG Bill Before April 6."

Timothy Geithner

Dodd Raps Treasury For Letting Him Take the Fall on Executive Pay

Elana Schor | March 20, 2009, 1:40PM

Sen. Chris Dodd (D-CT) just spoke to home-state voters about his sudden emergence as the scapegoat for the watering-down of his executive pay amendment to the stimulus bill -- and the Banking Committee chairman was openly angry with the Treasury Department for not owning up to its role in the flap earlier this week.

Dodd defended his role in ensuring that Wall Street compensation limits made it into the stimulus. The senator expressed disappointment that Treasury let him twist in the wind until yesterday evening, when Secretary Tim Geithner admitted that officials from his department requested that Dodd's amendment be changed to grandfather in existing bonus contracts.

We'll have the video of Dodd's comments for you soon, but here's his key quote:

I wouldn't go around and change my own amendment within days of that if I didn't think it was merely technical in nature.

And so I'm angry about it and angry that, in a sense, I've been held up as sort of responsible for all of this, when, in fact, I responded to what I thought was a reasonable request at the time [from Treasury] ... it turned out to be far more than that.

But this back-and-forth over the executive pay amendment isn't the only issue that could put Dodd at odds with Geithner and White House economic adviser Larry Summers.

As I mentioned earlier today, Dodd has been openly skeptical of consolidating future financial regulatory power at the Federal Reserve, preferring to run broader regulation out of the FDIC -- and that position may not sit well with Geithner, the former head of the New York Fed, as well as Summers, who is widely tipped to be the next Fed chairman.

Late Update: Here's the video of Dodd.

Bailout

Rep. Sherman Squares Off With Pro-Wall Street CNBC Host

Elana Schor | March 20, 2009, 12:41PM

On CNBC this morning, host Mark Haines -- who is catching heat this morning for arguing that Wall Street can't "be run well" by anyone making under $250,000 -- was at it again defending the need for high executive bonuses in order to keep Wall Street running.

But Haines' interviewee, Rep. Brad Sherman (D-CA), pushed right back at the host's conspicuously pro-Wall Street line.

When Sherman observed that "most people on Main Street do not" agree that AIG can't be put into government receivership (an assertion supported by recent polling on nationalization), Haines replied: "And what do the people on Main Street know about running a financial system?"

To which Sherman quipped: "What do AIG executives know about running a financial system? They only know how to destroy one."

Video of the exchange is below, and a full transcript is posted after the jump.

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Bailout

Fed Fight: Viewing the AIG Fallout From Dodd's End

Elana Schor | March 20, 2009, 12:10PM

As frustration with Sen. Chris Dodd (D-CT) reaches a fever pitch, both on the Hill and among his home-state voters, it's worth taking a step back and asking why some fellow Democrats left him to flail this week while they scrambled for cover from AIG anger.

Here's one potential answer, gleaned from months of watching the still-evolving debate over broader financial regulatory reform: depleting Dodd's political capital positions the Federal Reserve for a major increase in power by next year -- handing a plum position to Larry Summers, who has long been tipped as the next Fed chairman. As the WSJ put it:

Mr. Summers is widely seen as having ambitions beyond his current job. He originally wanted to be Treasury secretary, several Democrats say. He has long been described as a possible chairman of the Federal Reserve -- a job that could come open as soon as 2010, if Mr. Obama chose not to reappoint Ben Bernanke when his term runs out.

But why would kneecapping Dodd help those in D.C. who want regulatory power consolidated at the Fed?

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Executive Compensation

Geithner Confirms Treasury Asked Dodd For Bonuses Loophole

Elana Schor | March 19, 2009, 3:55PM

Treasury Secretary Tim Geithner has confirmed that his department did press Sen. Chris Dodd (D-CT) to water down the executive-bonus limits included in last month's stimulus bill, delivering a boost to the beleaguered Dodd -- but at a greater potential cost to his own damaged credibility on Capitol Hill.

In an interview set to air later today on CNN, Geithner took "full responsibility for the situation" and said "calls for resignation are part of the job," according to an early report on the network's website.

Late Update: The full exchange between CNN's Ali Velshi and Geithner is posted after the jump. It's notable how rapidly the media has become fixated on this change to the Dodd amendment ... considering that most mainstream news outlets were fudging the truth on it just days after it became law.

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Bailout

Could the Dems' AIG-Inspired Tax Bill Exempt Citigroup -- And Other Bailed-Out Banks?

Elana Schor | March 19, 2009, 1:58PM

Rep. Brad Sherman (D-CA), a senior member of the House Financial Services Committee, just pointed out the potential for loopholes to be opened in the AIG-inspired bonus taxation bill that his party is about to push to passage today.

Sherman, who warned TPMDC early on that executive-pay limits in the stimulus bill would be watered down, called today's bonus taxation bill "a step in the right direction" -- but noted that it would allow companies to still pay lavish bonuses while merely changing the terminology used to describe them.

But the most nagging question Sherman raised in his statement this afternoon relates to language in the Democratic bill that limits any bonus taxation to firms getting "capital infusions under the Emergency Economic Stabilization Act of 2008." Sherman interprets this language as applying to the preferred-stock purchases that were authorized under that law, which provided the first round of bailout funds nearly six months ago.

So would today's AIG-inspired bill apply to Citigroup, which last month converted its preferred stock to common stock and a "trust preferred security" with the government's blessing? And if 18 other banks follow Citigroup's lead by trading in their preferred stock -- they're all eligible to do so, as Federal Reserve Chairman Ben Bernanke said last month -- would that exempt those banks from today's bill as well?

Given the vaunted skill of internal counsels in the financial industry, one suspects they're working on making that potential loophole larger. You can read Sherman's full statement after the jump.

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Executive Compensation

GOPers and Dems Compete Over Who Can Seize Back Bonuses Faster

Elana Schor | March 19, 2009, 11:35AM

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.

Timothy Geithner

Report: Treasury Knew About AIG Bonuses Earlier Than Obama Administration Claims

Elana Schor | March 18, 2009, 6:07PM

AIG CEO Edward Liddy told the House Financial Services Committee today that the Federal Reserve had okayed his company's planned bonuses in advance -- and now Time magazine reports that the Treasury Department also knew about the ticking political time-bomb earlier than it has acknowledged.

As the magazine reports:

"Treasury staff was informed about the new bonuses in a Feb. 28 memo that the March 15 [bonus-payment] date was upcoming," a Federal Reserve source tells TIME. A Treasury Department source, speaking on background, confirmed the e-mail memo and its contents, saying, "Everybody knew that [AIG] had a retention issue."

When the debate comes down to a Nixon-style "what did he know and when did he know it," things aren't looking good. And we may have just reached that point for Treasury Secretary Tim Geithner.

Bailout

GOP Senator Seeks IG Review of Treasury's Role in AIG Bonuses

Elana Schor | March 18, 2009, 2:09PM

Republican Sen. Chuck Grassley (IA) has asked the Treasury Department inspector general (IG) to open an inquiry into senior officials' knowledge of AIG's plans to pay out $450 million in bonuses to employees of its disgraced Financial Products unit.

In a letter to the Treasury IG today, Grassley singles out the department's general counsel as the office "largely involved" in the decision to let AIG proceed with its bonuses. Treasury chief Tim Geithner has said he became aware of the bonuses last Tuesday and notified the White House two days later, but Grassley also has asked the IG to examine that timeline.

Grassley's full letter to the IG, Eric Thorson, can be read after the jump.

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Bailout

Dem Rep. to Citigroup CEO: Explain How You Didn't Lie to Me

Elana Schor | March 18, 2009, 1:00PM

When Rep. Dennis Moore (D-KS) asked Citigroup CEO Vikram Pandit about his 2008 compensation last month, Pandit gave a simple answer: $1 million. Except the truth wasn't so simple.

Pandit actually received $11 million as part of a lavish package of stock awards and retention pay, making his testimony to Moore dangerously close to an outright falsehood. And Moore is calling on Pandit to explain himself in a frustrated letter sent yesterday, a copy of which has been obtained by TPMDC.

Moore writes:

While I was initially pleased to hear you agree to take a salary of $1 per year with no bonus until Citi returns to profitability, I am deeply troubled by this latest news. Should we expect additional, unexpected announcements of bonuses or financial compensation for your work in 2008 or going forward until Citi returns to profitability?

Bailout

Senators Unveil AIG-Inspired Bonus Taxation Proposal

Elana Schor | March 18, 2009, 9:52AM

Senate Finance Committee Chairman Max Baucus (D-MT) and his GOP counterpart, Sen. Chuck Grassley (IA), have unveiled a plan to prevent future AIG-type bonuses from getting paid out by imposing a 35% excise tax on both individuals and companies involved in such awards.

Baucus' and Grassley's plan closely resembles the bonus tax proposal that Sens. Ron Wyden (D-OR) and Olympia Snowe (R-ME) added to the economic stimulus bill -- before it was unceremoniously yanked from the final version of the measure.

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