There are many reasons to criticize Senator Dodd's relationship with the banking industry. But criticizing him for creating a loophole that permits the payment of AIG's bonuses is utterly misguided.
The Associated Press reports that Dodd is battling the appearance of impropriety with respect to AIG's payment of bonuses to its executives. Many commentators have wrongfully argued that Dodd sponsored an amendment to the stimulus package that created a loophole for AIG to award the bonuses, which many people believe are excessive. This argument, however, is a falsehood.
Neither the original TARP legislation -- which passed during the Bush administration -- or the subsequent Treasury Department regulations prohibit AIG from paying the bonuses. Therefore, federal law authorized payment of the bonuses with or without Dodd's alleged assistance.
The controversy over Dodd results because several misleading reports blame Dodd -- rather than Congress and the Treasury Department -- for failing to prohibit the bonuses. Many bloggers and media sources (myself included) have attempted to portray the facts surrounding Dodd's amendment to the stimulus package. Now FactCheck.Org has joined the fray.
For those of you who remain confused, please check out the analysis on FactCheck. It demonstrates (citing many links) that:
* Dodd proposed an amendment to the stimulus package that would have prohibited payment of bonuses by TARP participants and that would have applied retroactively to companies like AIG;
* The pre-existing statute and relevant regulations do not prohibit the bonuses;
* Dodd's amendment passed in the Senate;
* Officials in the Treasury Department pressured Dodd to delete language giving his amendment retroactive application, and they, along with White House Senior Advisor David Axelrod, publicly expressed their disagreement with the provision;
* The retroactivity clause was deleted from the final version of the amendment because Dodd conceded to pressure from the Executive Branch.
Senator Dodd Fights Back: Says Obama Administration Pressured Him to Change a Provision He Sponsored That Would Have Banned AIG's Bonus Payments
'Blame Dodd' Attacks Ignore Facts