Wednesday, March 18, 2009

Who Enabled A.I.G's. Bonus Bonanza?

Jane Hamsher wrote an important post yesterday in which she tries to track down exactly who engineered a change in the 2009 TARP ("bailout") legislation to protect A.I.G.'s ability to pay $165 million in bonuses.

Relying for the most part on Wall Street Journal news reports from mid-February as the final language of the TARP bill was being hammered out, she concludes it must have been Larry Summers, chairman of the White House Council of Economic Advisors and U.S. Treasury Secretary Tim Geithner:
So Treasury says Chris Dodd did this? In a word. . . no.
* * *
[The Dodd bill] that passed the Senate actually made the compensation limits retroactive, according to the Wall Street Journal:

"The most stringent pay restriction bars any company receiving funds from paying top earners bonuses equal to more than one-third of their total annual compensation. That could severely crimp pay packages at big banks, where top officials commonly get relatively modest salaries but often huge bonuses.

"As word spread Friday about the new and retroactive limit -- inserted by Democratic Sen. Christopher Dodd of Connecticut -- so did consternation on Wall Street and in the Obama administration, which opposed it.
Who pushed back against Dodd, and told him to neuter the provision? The WSJ says Geithner and Summers:
"The administration is concerned the rules will prompt a wave of banks to return the government's money and forgo future assistance, undermining the aid program's effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said."
Now, there is no doubt that the final February "TARP" legislation was a decided improvement over anything the Bush administration had a hand in last Fall, particularly when it comes to executive compensation limits. But if the WSJ reports at the time were accurate -- and that has yet to be definitively established -- it's a dead certainty that mud from the A.I.G. fiasco will splatter all over President Obama, anyway, unless he demands and receives the resignations from Smmers and Geithner immediately.

On the other hand, if the Journal had it wrong last month then the White House needs to collar the real culprits -- whoever the congressmen or administrative officials or cabinet officers may be -- and make them Exhibit No. 1 in its "Open Government" initiative.

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