Sen. Dodd Admits Adding Bonus Provision to Stimulus Package

[OddsOn]

More typical antics from Washington politicians. You cannot honestly believe that these guys did not know exactly what they were doing from the start. And if they truly didn't know I am not sure which is worse; the total ignorance and blind knee jerk action or an atrocious dereliction of duty. Furthermore this is setting a very bad precedent and even if you don't agree with the bonuses being issued you should be very much against congress setting a special tax to take the money back. If they can do it to the folks at AIG they can then do it to anybody they want and that should scare the crap out of you.


Sen. Dodd Admits Adding Bonus Provision to Stimulus Package

Sen. Dodd Admits Adding Bonus Provision to Stimulus Package
Sen. Chris Dodd says Treasury forced him to add language to the stimulus bill last month that specifically excluded executive bonuses included in contracts signed before the bill's passage.

By Trish Turner
FOXNews.com
Wednesday, March 18, 2009

In a dramatic reversal Wednesday, Sen. Chris Dodd confessed to adding language to a spending cap in the stimulus bill last month that specifically excluded executive bonuses included in contracts signed before the bill's passage.

Dodd, D-Conn., told FOX News that Treasury officials forced him to make the change.

"As many know, the administration was, among others, not happy with the language. They wanted some modifications to it," he said. "They came to us, our staff, and asked for changes, and the changes at the time did not seem that obnoxious or onerous."

But the provision has become a flash point for criticism amid the controversy over $165 million in bonuses given out by AIG after securing more than $170 billion in federal aid. The language in the stimulus bill wasn't specific to AIG, but some have expressed outrage that it appears to have created a loophole.

Dodd said the argument put forward by Treasury was that a "flood of lawsuits" would come forward if the change was not made.

Dodd said he was unaware of the AIG bonuses at the time the bill was being written back in early February. He also said he has no reason to believe Treasury officials making the argument knew about the AIG bonuses.

When asked how administration officials have this kind of leverage over members of Congress, Dodd said, "The administration has veto power. ... No one suggested a veto to me, I don't want to imply that to you. But certainly that's not an insignificant tool."

On Tuesday, Dodd told FOX News that he didn't add the exemption.

"When the language went to the conference and came back, there was different language," he said then. "I can tell you this much, when my language left the Senate, it did not include it. When it came back, it did."

Dodd still thinks the Treasury can get the bonuses back, despite the inclusion of a date in the stimulus bill, and he said officials are, in fact, using his very language to claw back the money.

"There is language after that date that says explicitly that the Treasury has the right to modify, reaching back, those bonuses, compensations, if it's inconsistent with the TARP legislation or contrary to the public interest," he said.

"In fact, it's that phrase that the administration is relying on this evening as a means by which they can reach back and maybe get these bonuses back," he said.

Still, Dodd has his enemies. The Senate Republican re-election campaign quickly shot out a statement on the Dodd reversal, as he is a prime target in the 2010 midterm elections and is facing a Republican opponent who, in one poll, is in a statistical tie with him.

"Senator Dodd's reversal on this issue is both astonishing and alarming," the National Republican Senatorial Campaign said in a written statement. "Contrary to his statements and denials over the last 24 hours, Senator Dodd has now admitted that he and his staff did in fact change the language in the stimulus bill to include a loophole for AIG executive bonuses."

The group added that Dodd had "misled voters and equivocated on his statements ."

[OddsOn]

And as a supplement to this....

And how come nobody mentions the campaign contributions that Obama got from AIG when he was running for president?


Dodd Blames Obama Administration for Bonus Amendment

By Ryan J. Donmoyer

March 19 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said the Obama administration asked him to insert a provision in last month’s $787 billion economic- stimulus legislation that had the effect of authorizing American International Group Inc.’s bonuses.

Dodd, a Connecticut Democrat, said yesterday he agreed to modify restrictions on executive pay at companies receiving taxpayer assistance to exempt bonuses already agreed upon in contracts. He said he did so without realizing the change would benefit AIG, whose recent $165 million payment to employees has sparked a public furor.

Dodd said he had wanted to limit executive compensation at companies that got money from the government’s financial-rescue fund. AIG has received $173 billion in bailout money. His provision was changed as the stimulus legislation was negotiated between the House and Senate.

“I did not want to make any changes to my original Senate- passed amendment” to the stimulus bill, “but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG,” Dodd said in a statement released last night. “Let me be clear -- I was completely unaware of these AIG bonuses until I learned of them last week.” He didn’t name the administration officials who made the request.

No Insistence

An administration official said last night that representatives of President Barack Obama didn’t insist on the change, though they did contend that the language in Dodd’s amendment could be legally challenged because it would apply retroactively to bonus agreements. The official spoke on the condition of anonymity.

That provision in the stimulus bill may undercut complaints by congressional Democrats about the AIG bonuses because most of them voted for the legislation. No Republicans in the House and only three in the Senate supported the stimulus measure

“Taxpayers deserve better than this from their government, and this is just the latest reason why legislation must be transparent for all Americans to see before it is recklessly signed into law,” said Eric Cantor, the No. 2 Republican in the House.

The new law, approved by Congress Feb. 13 and signed into law by Obama the next week, effectively authorized bonus arrangements at companies receiving taxpayer bailouts as long as they were in place before Feb. 11. The AIG bonuses qualified under that provision.

Obama and many lawmakers who voted for the legislation, such as Senator Charles Schumer, a New York Democrat, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, are demanding AIG employees surrender their bonuses.

Schumer Letter

Schumer yesterday sent a letter to AIG Chief Executive Officer Edward Liddy warning him to return bonuses or face confiscatory taxes on them. The letter was signed by Senate Majority leader Harry Reid, a Nevada Democrat, and seven other senators.

Brian Fallon, a spokesman for Schumer, said the senator “supported a provision on the Senate floor that would have prevented these types of bonuses, but he was not on the conference committee that negotiated the final language.”

A House vote is planned for today on a bill to impose a 90 percent tax on executive bonuses paid by AIG and other companies getting more than $5 billion in federal bailout funds.

“I expect it to pass in overwhelmingly bipartisan fashion,” House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters yesterday in Washington.

Republican Attacks

Republicans seized on the provision in the stimulus bill to paint Democrats as hypocrites.

“The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate,” Iowa Senator Charles Grassley said in a statement.

Dodd said the provision was written to give the Treasury Department enough discretion to reclaim bonuses as necessary.

“Fortunately, we wrote this amendment in a way that allows the Treasury Department to go back and review these bonus contracts and seek to recover the money for taxpayers,” he said.

Treasury Secretary Timothy Geithner told lawmakers in a letter this week that department lawyers believe it would be “legally difficult” to prevent AIG from paying bonuses.

Other Democrats who voted for the stimulus bill have ramped up criticism of AIG’s bonuses, including Massachusetts Representative Barney Frank, the chairman of the House Financial Services Committee, who told reporters, “I think the time has come to exercise our ownership rights.”

[bobrek]

Shouldn't we be concerned that Congress is now trying to enact a 90-100% tax on these bonuses for folks that have a "family" income of over $250,000?

Regardless of how you feel about the bailout(s) and incompetence in some of these compaines, the fact is that the government did provide bailout funds and specifically wrote into the agreements that bonuses prior to 02/11/2009 are exempted. Now Congress is trying to essentially renege on that deal by creating this new tax.

Again, the argument isn't whether or not the bailout(s) should have been done in the first place or whether the companies should or should not have paid these bonuses. It is disconcerting to me that Congress is now trying to retroactively recoup the majority of these bonuses in the form of a new tax.

In many (if not all) cases, the companies are contractually obligated to pay these bonuses and they received assurance from Congress that these contractually obligated bonuses would be honored.

[pirc1]

I am starting to wonder if Geithner is really the right person for the job.

[Bogey]

What a mess!!!!

[deepblue]

Originally Posted by bobrek Shouldn't we be concerned that Congress is now trying to enact a 90-100% tax on these bonuses for folks that have a "family" income of over $250,000? Regardless of how you feel about the bailout(s) and incompetence in some of these compaines, the fact is that the government did provide bailout funds and specifically wrote into the agreements that bonuses prior to 02/11/2009 are exempted. Now Congress is trying to essentially renege on that deal by creating this new tax. Again, the argument isn't whether or not the bailout(s) should have been done in the first place or whether the companies should or should not have paid these bonuses. It is disconcerting to me that Congress is now trying to retroactively recoup the majority of these bonuses in the form of a new tax. In many (if not all) cases, the companies are contractually obligated to pay these bonuses and they received assurance from Congress that these contractually obligated bonuses would be honored.

That's ok though, just do what the Treasury Secretary did, don't pay the taxes.

[wakkoman]

Originally Posted by pirc1 I am starting to wonder if Geithner is really the right person for the job.

That thought didn't cross your mind when it became known the top economic and financial adviser to the President forgot to pay some taxes?

[pirc1]

Originally Posted by wakkoman That thought didn't cross your mind when it became known the top economic and financial adviser to the President forgot to pay some taxes?

No. Look if he is good enough to find a way out of this mess I am willing to look past his little forgetfulness. He is looking alot like Paulson in his dealing with this mess.

[MoonDogg]

[wakkoman]

Originally Posted by pirc1 No. Look if he is good enough to find a way out of this mess I am willing to look past his little forgetfulness. He is looking alot like Paulson in his dealing with this mess.

I know, it was a bit sarcastic. I just find it incredibly ironic and hilarious that the man responsible for the finances of the US government isn't responsible enough to pay his taxes

But yeah, I would argue that he's looking worse than Paulson. Geithner appears to be a big push-over and hasn't shown much competence about the situation and what to do, which are qualities most people would not want in a Treasury Secretary during times like these.

[pirc1]

Originally Posted by wakkoman I know, it was a bit sarcastic. I just find it incredibly ironic and hilarious that the man responsible for the finances of the US government isn't responsible enough to pay his taxes But yeah, I would argue that he's looking worse than Paulson. Geithner appears to be a big push-over and hasn't shown much competence about the situation and what to do, which are qualities most people would not want in a Treasury Secretary during times like these.

He may yet surprise all of us, it is only the first quarter, so the game is not over. But I wonder if he is the only one Obama trust enough to give him the secretary of treasure position, there are no better people?

[OddsOn]

Originally Posted by pirc1 No. Look if he is good enough to find a way out of this mess I am willing to look past his little forgetfulness. He is looking alot like Paulson in his dealing with this mess.

I would beg to differ, it was not a little forgetfulness, he blatantly refused to pay them. If you or I did this we would be stripped of our possessions by the IRS and probably end up in jail for tax evasion. Now thats hypocrisy at its finest and all to much the standard with politicians these days.

[pgabriel]

Originally Posted by OddsOn If you or I did this we would be stripped of our possessions by the IRS and probably end up in jail for tax evasion.

no you would not, not for that amount of money.

[JuanValdez]

Originally Posted by bobrek Shouldn't we be concerned that Congress is now trying to enact a 90-100% tax on these bonuses for folks that have a "family" income of over $250,000?

Yeah, I don't think this sort of targeted tax is permissable and I get the feeling I've read about prior attempts to do this that were struck down as unConstitutional. I wish I could remember what case I'm thinking of. Does anyone have any insight on whether Congress can do such a tax?

[bobrek]

Originally Posted by JuanValdez Yeah, I don't think this sort of targeted tax is permissable and I get the feeling I've read about prior attempts to do this that were struck down as unConstitutional. I wish I could remember what case I'm thinking of. Does anyone have any insight on whether Congress can do such a tax?

The disconcerting piece to me is that the government made an agreement concerning these bonuses which was specifically written into the legislation and are now trying to change it after the fact.

[SamFisher]

Originally Posted by bobrek The disconcerting piece to me is that the government made an agreement concerning these bonuses which was specifically written into the legislation and are now trying to change it after the fact.

No they didn't. You are getting things confused.

[DCkid]

Originally Posted by SamFisher No they didn't. You are getting things confused.

I'm still not sure where you're getting this from? Can you provide a link. Every article I read refers to the text in question as a "loophole" that was added at the last minute, and mention how it protects the bonuses paid out to execs. And I'm not reading "right wing blogs" here. These are articles from CNN.

Furthermore, why is Chris Dodd even acknowledging that the language he put in the bill protects the AIG bonuses...I mean, he wrote it. Shouldn't he be trying to set the record straight?

You may be right, but you are the only source I've heard from saying the bill doesn't protect the bonuses.

[bobrek]

Originally Posted by SamFisher No they didn't. You are getting things confused.

Educate me then. Dodd himself admits there is language in the bill which allows the bailed out companies to "honor" bonus commitments prior to a particular date (I think 02/11/2009).

[SamFisher]

Originally Posted by bobrek Educate me then. Dodd himself admits there is language in the bill which allows the bailed out companies to "honor" bonus commitments prior to a particular date (I think 02/11/2009).

The provision in question is EESA, SEction 111(b)(3)(D)(iii).

This provision exempts bonuses pre Feb 2009 from the provisions of SEction 111(b)(3)(D)(i) - which, more or less, automatically halts all bonus payments to top level executives at TARP companies. Top level is either the top 5 guys, or up to the top 25 guys, depending on the amount of assistance the company got


So two things here:

1. The provision does not "guarantee" anything, it just exempts them from automatic ban on bonuses.

2. The provision is limited to the top 25 executives at AIG (AIG is large TARP recipient, hence the auto-holdback goes to the top 25).

In consideration of point 2 -

The $1 billion AIG retention bonuses in total went out to 4600 employees. Most of these employees had nothing to do with the destruction of AIG, which was caused (mostly) by AIGFP.

The $165 million in AIGFP bonuses (which were a part of the larger sums) in question went out to about 100-200 AIGFP employees - very few or none (I would estmate probalby around 5, at most, and probably fewer, of these guys) would qualify as top 25 execs at AIG, either in terms of rank or in terms of total compensation - accordingly this exemption is inapplicable.

Originally Posted by DCkid You may be right, but you are the only source I've heard from saying the bill doesn't protect the bonuses.

See above. The plain language of EESA 111 defines senior executives as up to the top 25 executives of the company. When you consider that 4600 AIG people got bonuses, all it takes is knowledge that 4600 > 25 to figure out that most of these bonuses are not covered by its provisions.

[juicystream]

edit: I just had a moment of clarity.