The Misdirected AIG Outrage

The Misdirected AIG Outrage

It is amusing to watch politicians in Washington beat their breasts in outrage over the retention bonuses paid at insurance giant AIG. These bonuses were exempted in the spendulous/stimulous/porkulous bill by Sen. Christopher Dodd. Now he's joined the chorus of "outrage" over the bonuses. They've known for months that these were in the works. This is just a deflection from the failures of the Obama Administration.

The Wall Street Journal notes that the outrage over AIG is misdirected and that the real outrage should be over what AIG did do with the bailout money they received.

The WSJ.com website editorialized today:

President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout.

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG "rescue." This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

This is what people and politicians should be outraged about, not over some piddly bonuses.

To read the full WSJ editorial, go here.

Before they received their bailout, AIG was heavily into giving campaign contributions to our favorite politicians. Sen. Christopher Dodd was the top recipient:

Dodd, Chris (D-Conn): $280,238

To see the list of politicians and what they received from AIG, go here.

UPDATE:

Senator Chris Dodd (D-Conn.) on Monday night floated the idea of taxing American International Group (AIG) bonus recipients so the government could recoup some or all of the $450 million the company is paying to employees in its financial products unit. Within hours, the idea spread to both houses of Congress, with lawmakers proposing an AIG bonus tax.

The move represents somewhat of an about-face for the Senator.

While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” -- which exempts the very AIG bonuses Dodd and others are now seeking to tax.

To read the full article, go here.

UPDATE (3/18/09): Senator Christopher Dodd finally admitted he was instrumental in allowing the AIG bonuses.

From the Stamford (CT) Advocate:

U.S. Sen. Christopher Dodd for the first time Wednesday acknowledged he was instrumental in creating legislation that cleared the way for disgraced executives at taxpayer-rescued AIG to walk away with more than $100 million in bonuses.

And the Connecticut Democrat had to explain the receipt of more than $100,000 in campaign donations in the last presidential cycle from AIG workers, vowing to return any tainted contributions from company executives.

But the campaign contributions issue will be dwarfed by whether Dodd eased the way for huge executive bonuses at AIG. In an interview Wednesday afternoon, the senator said he had hoped that an amendment he had drafted to limit executive pay under last year's Targeted Asset Relief Program would have ruled out hefty bonuses.

"I thought we covered that," Dodd said of the bonus issue. His amendment had passed the Senate but was later relaxed by the conference panel that works out differences between versions of legislation passed in the two chambers of Congress.

But later Wednesday, Dodd told CNN that he had agreed to change his amendment -- at the request of the Obama administration -- to ensure that previously enacted bonus contracts would be honored despite billions of dollars awarded to bailout beneficiaries.

"The alternative was losing the amendment entirely," he told the network. Administration officials feared that without the language the bailout measure would be deluged with lawsuits, Dodd said.