A.I.G. Planning Huge Bonuses After $170 Billion Bailout – New York Times (3/14/09):
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.
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.
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.
This quoted passage is a contemporaneous report from February 14th, one month ago. I am not aware of the administration correcting the record at any time over the last month, so the gutless unnamed administration official in the current quote is slandering an endangered Senate Democrat (Dodd) to protect the men who are endangering Obama‘s Presidency. That’s nice work. AIG is going to come to epitomize the failed reaction to the banking crisis, by both Bush and Obama. But Bush doesn’t have anything left to run for. Meanwhile, Obama doesn’t seem to realize how pissed regular people are over this, probably because he only listens to Summers and Geithner, two men who have capitalized on every opportunity to show that they are completely tone-deaf when it comes to policy and politics, and more concerned about their cronies on Wall Street than about the country as a whole. And Obama is jammed up now; he needs to get rid of at least Geithner, but can’t do that without taking additional fire for the bad decision to hire him in the first place. Press reaction will no doubt feature the word “disarray,” not a very attractive option for a guy who preens himself as calm and collected. The only way to limit the damage would be to convince 81-year-old Paul Volcker to leave the political backwater of the Economic Recovery Advisory Board and take on the oh-so-attractive task of cleaning up Geithner’s mess with Summers sabotaging him at every step. I wonder if Volcker has turned off his cell phone yet…
We had a discussion in the comments last week about the economy vis-a-vis Obama’s chances at re-election if things don’t improve. At this point, even if things did improve, the wasted bonus money (a tiny fraction of the bailout, but optically very damaging) remains an incredibly potent line of attack. These are very dangerous waters for Obama anyway, why are his own people bailing water into the boat?