Monday, March 23, 2009

Clearly, Dodd Has Made Enemies: New Article "Strains" to Link Dodd to "AIG-Controlled" Company

Today's "most shocking yet misleading article title" award goes to Kevin Rennie, a Republican writer for the Hartford Courant and former Connecticut State Senator. Rennie's article, "Dodd's Wife a Former Director of Bermuda-Based IPC Holdings, an AIG Controlled Company" implies that Dodd may have had secret motivations for protecting AIG from the stringent bonus requirements he drafted and offered as an amendment to the stimulus package.

Neither TARP, which Bush and Paulson introduced, nor the related regulations promulgated by the Bush and Obama administrations ban executive bonuses -- i.e., they do not prohibit AIG's payment of the bonuses. Conservatives and other anti-Dodd commentators, however, have falsely argued that Dodd created a loophole to permit AIG's payment of the controversial bonuses. Although Factcheck.Org and several bloggers have described the actual events surrounding Dodd's amendment, distorted accounts continue to emerge.

In a nutshell, the original law and subsequent regulations do not prohibit bonus payments by AIG. Dodd proposed and the Senate passed an amendment that would have banned most bonus payments by TARP recipients; the measure would have applied retroactively to AIG. The Obama administration pressured Dodd to make his amendment prospective rather than retroactive; Dodd capitulated to the administration's demands, and Congress passed the modified version of Dodd's amendment.

Instead of blaming Obama, Bush, and Congress, commentators point the finger at Dodd, even though his amendment is the only legal provision that seriously regulates compensation and bonuses for TARP recipients. It is also worth mentioning that Dodd alone cannot legislate a loophole for AIG; only Congress can! But this elementary civics issue escapes Dodd's critics.

Rennie's Misleading Article
Rennie's article suggests many levels of potentially sinister behavior by Dodd. The title declares that Dodd's wife was the director of an "AIG-controlled" company. Based on this fact alone, Rennie concludes that "Dodd is likely more familiar with the complicated workings of AIG than he was letting on last week." Rennie's "analysis" is just as bogus as the silly House measure that imposes retroactive civil liability upon AIG executives who have already received the controversial bonus payments.

First, Rennie uses the loaded term "controlled" to describe the relationship between AIG and the firm for which Dodd's wife served as an "outside" director (she was not a principal of the company). But closer scrutiny simply reveals that AIG held a 20% stake in the company. This minority stake does not give AIG control, and the article does not even state whether the shares carried voting privileges or not.

Also, Rennie's article states that AIG sold its stake in the company in 2006. Thus, the weak factual basis for Rennie's suggestion of a relationship between Senator Dodd -- via his wife -- and AIG no longer exists. Rennie states that a "subsidiary" of AIG "managed" the company, but that is all he provides about the relationship. Assuming Rennie's version of the "facts," Dodd's wife served as an "outside" director of a company from 2001-2004, and AIG had a 20% stake in the company from 2001-2006, a maximum overlap of 4 years, which ended 5 years ago. That's a pretty thin reed for implying an improper relationship. Rennie cannot contain his partisanship.

PS: I have no particular fondness for Dodd, but I lived in Connecticut for 3 years (during law school). Perhaps, I have a close connection to him as well.


Anonymous said...

As a conservative, my problem with Dodd's actions in this case, isn't the loopholes that he introduced. Personally, I think having signed TarpI, something I consider the equivalent to a contract, congress should honor the bonuses.

My issue is with his initial outright denials, followed by feigned ignorance, then denial of any culpability.

However, the most disturbing aspect of this episode, is that it is further evidence of members of congress not doing their job of reading these bills before they sign them. Your right, to paraphrase Hillary, it takes a congress.

Now we are left a congress and administration that is going to spend a lot of time and money trying to recoup the funds, when they had the ability to slash billions, with just a cursory view of these bills.

Dodd's actions, as well as those of congress, and the administration are disingenuous and an egregiously inefficient use of time. Deserved or not, through his prior interactions with AIG and Countrywide to name just two, Dodd has made himself the poster boy for this debacle.

Darren Lenard Hutchinson said...

Hey, anonymous. Thanks for posting. I said a while ago that there are many reasons to question Dodd's relationship with the banks. In fact, I think that the reason he proposed the tough measure was to deflect arguments that he was in bed with the banks.

My guess is that he "waffled" initially because he was probably unclear about whether to implicate the administration. Think about the choices: he says "yes, I did it" which makes him look guilty or "no - Obama did it" which places him in opposition to a popular president in his own party. So, he came across looking "creepy." But once the Treasury Department blamed Dodd, he rightfully defended himself.

I am not a Dodd fan. I just find it interesting that people blame Dodd for weakening the law, when he actually toughened it. But then again, people are blaming AIG and its employees, when the blame lies with Congress, Bush, Obama, Paulson and Geithner.

Anonymous said...

We're on the same page Mr. Hutchinson. It's hard to walk on a picket fence. That being said however, the best solution to that dilemma: Don't attempt to walk on picket fences.

With few exceptions, every single member of congress would do well to start actually doing their jobs. I intend to fire all of mine.

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