Friday, March 20, 2009

Senator Dodd Continues to Suffer Fallout For Something He Did Not Do

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.

See also:

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

23 comments:

dualdiagnosis said...

Dodd did a good job of adding to the confusion by starting out with denials.

Kansas City said...

You are too kind to Dodd, who is about the biggest of the pompous blowhards in the Senate. He denied having anything to do with it, when, in fact, he was fully aware of what was going on and a particpant in it. You are technically correct that he did not "create" it, but to the extent is was a mistake (which I don't even agree with), it was he who agreed to it. My only regret is that he probably has enough time for people to forget this and for him to have a decent shot at re-election.

Darren Lenard Hutchinson said...

DD - I think Dodd was probably still under marching orders to protect the White House. Also, the only "confusion" his comment could cause is whether he knew "why" the change happened. Regardless of the change, neither Bush/Paulson nor Obama/Geithner banned bonus payments.

Darren Lenard Hutchinson said...

KC - being a "pompous blowhard" does not alter reality. The culpable "party" here is the full Congress and presidents Bush and Obama. One person does not make legislation....

Kansas City said...

check this out and even the NYTimes. Hopefully, Dodd is finally toast.

http://althouse.blogspot.com/2009/03/christopher-dodd-had-i-known-at-time.html

1950 Democrat said...

Ftm, some of the responsible people may have been fired long ago, and some of those getting the recently contracted bonuses may be new people recently hired to clean up the mess. This needs to be sorted out case by case, employee by employee.

Any new person considering taking a job at such a company, had better get payment in advance....

Kansas City said...

Bush??? Can't you guys ever let go of blaming Bush for everything? He was not even there when the provision was created.

Generally, the comment about who "created" teh provision is about the only framing that saves Dodd. HE AGREED TO IT. IT WAS HIS JOB TO KNOW AND TO DECIDE ON THE PROVISION. HE DID. HE AGREED WITH IT. THEN HE LIED ABOUT IT.

Roy Lofquist said...

I'm afraid I'm getting a bit cynical in my dotage. It appears to me that this whole bonus thing was a designed political distraction but they rushed it and missed some stuff - like You-Tubes of committee hearings.

I think You-Tube and bloggers are the insurgents that are going to blow up a lot of political safe houses. It's fun to watch.

Darren Lenard Hutchinson said...

KC - the "blaming Bush for everything" line will not only work for me as an argument, but it is fairly bizarre comment to hurl towards me, given the numerous articles I have written condemning Democrats. Check out these, for example: Hold Them Accountable Too: Many Democrats Supported Policies of the "Worst President" (Part I); Hold Them Accountable Part II: If Conservatives Caused the Economic Crisis, They Had a Lot of Help from Democrats!; and Get a Grip People: Bush Is not the Worst President in U.S. History.

Finally, you really have not responded to the substance of my argument - which is indisputable. The reason why these bonuses were legal in the first place is because the original legislation proposed by Bush and passed by Congress permitted them. Bush/Paulson failed to create regulations that would have denied them, and Obama/Geithner failed to do so as well. Congress also did not amend TARP to prevent the bonuses. Please explain why it is wrong to include Bush on the list of culpable parties?

Finally - it really does not matter that Dodd proposed an amendment. The bonuses were legal with or without Dodd's proposal. I am not sure you are missing that point - but it seems like you are.

Darren Lenard Hutchinson said...

Roy - I think the "outrage" was a distraction to prevent outrage over the fact that the orginal legislation and subsequent regulations failed to prohibit the bonuses. The public would have reacted negatively to the bonuses, with or without bloggers. Government officials floated the issue in order to react with outrage before the public got a chance to start blaming them. As a result, the public blamed AIG instead of the government. Only Geithner has received criticism. Dodd has received unfair criticism, given that it takes an entire Congress to pass legislation, and his amendment (which was subsequently amended) only passed in the Senate.

Darren Lenard Hutchinson said...

PS: KC- Merril Lynch - which collapsed and was bought by Bank of America with $25+ billion in TARP funds, paid out $2.5 billion in bonuses in December. So, if the bonus controversy is "real," then certainly, both the Obama and Bush administrations (and Congress) are responsible: Merril Lynch Bonuses

Roy Lofquist said...

Darren,

Again, complete agreement.

My point, which admittedly was not quite explicit enough, is that this may well backfire - signs are appearing. Prior to YouTube and bloggers the situation was this: No professional reporter would dig into prior hearings to catch the contradictions.

C-Span opened the door but there weren't many who had the time or the patience to be utterly bored for hours on end to catch the occasional nugget. Now, only one person has to remember it and YouTube and the net make it viral. It is a brave new world. The crooks don't understand surveillance cameras yet.

Roy

Kansas City said...

It remains an incredible stretch to blame Bush for the February 2009 law. Sure, he and the Congress could have prohibited them back in 2008, but the issue, as framed by your comment, is who is responsible "creating a loophole" in February 2009 - certainly not Bush.

By the way, as you know, the bonuses are "legal" as a matter of contract law. The issue is whether Congress should have prohibited them in the 2009 law.

Your defense to my "blaming Bush for everything" charge is that you sometimes blame both Bush and democrats - not very persuasive in my mind and, of course, not an example of you not blaming Bush. And I think your "not the worst president" put him near the bottom in your opinion - effectively blaiming him again for the problems.

Darren Lenard Hutchinson said...

KC - no one is blaming Bush for the February law! I have correctly argued that the original TARP legislation did not prohibit the use of TARP funds to pay bonuses. The fact that a contract provides for bonuses does not prevent the government from conditioning the receipt of federal money on the disallowance of bonuses. For me, this has to take place BEFORE, not after the bonuses are paid.

Any bonuses paid with TARP funds result because BUSH and OBAMA and CONGRESS failed to prevent them from being paid using federal funds. Period. A "loophole" was not necessary under Bush's statute, because it didn't even regulate compensation and bonuses in the first place. Accordingly, whether or not Dodd placed the amendment in the text, bonuses were legal. Both administrations and Congress are at fault. Your admiration for Bush cannot change this.

Finally, you never responded to my point that in 2008 Merill Lynch paid $2.5 billion in bonuses as it was "sold" to Bank of America with TARP funds. As you recall, Obama did not take office until 2009. As much as it might cause pain to admit this, that was all Bush/Paulson -- and a much larger set of bonuses than AIG.

PS: Bush - the man - is irrelevant to me. The only reason I use his name, is because he was president. Perhaps you should mentally substitute No. 43 where you see Bush in my arguments. It works just as well. The only reason I mentioned my other articles is because you are trying to portray me as a "liberal" who likes "blaming Bush" for "everything" which is utterly false (read the articles).

Darren Lenard Hutchinson said...

Hey Roy - thanks for the follow-up.

Kansas City said...

You are moving the goal posts. Your post focused on who created the loophole after Bush departed. You now want to criticze Bush for failing to establish a prohibition prior to leaving office.

As to your citation of prior articles to prove you are not a Bush basher, those articles essentially say Bush was horrible and sometimes democrats agreed with him and there were a few things that you could not blame bush for. So, I guess you are innocent of blaming Bush for everything.

The following are two statements you made in those articles:

The end of Bush's disastrous presidency has generated a lot of commentary

Others Compete Strongly With Bush for the Bottom-Feeder Award

I think you still qualify was a big time Bush basher and, as I asked in another comment, I don't understand why liberals are unwilling to recognize some positive things out of the Bush adminisration and even some positive things out of the Iraq War.

Darren Lenard Hutchinson said...

You are distorting my original post. I said that Dodd is being UNFAIRLY criticized for creating a loophole. Regardless of whether the amendment was included, the bonuses would have been legal under existing law. Dodd wanted to make them illegal, but the administration defied him. Obama's position was the same as Bush's.

I have always maintained that neither administration made the bonuses illegal. If they are such an outrage under Obama, why wouldn't they be an outrage under Bush?

Also - you are misreading my articles. I clearly say that "IF" conservatives did [fill in the blank] they had a lot of help from Democrats. Often I do criticize the policies of Bush, but I criticize Democrats for joining them. What's wrong with that? It just clearly shows I criticize both teams.

But you need to look again - especially at the economic policy argument. I have said time and time again that it is unfair to assign so much power over the economy to presidents, but that people do this all the time. I have not blamed Bush or Republicans or Democrats for the country's economic demise. Instead, many forces - including the private sector, government policy, consumer habits, etc., created this mess. How is that saying "Bush was horrible"? I think you are projecting.

Bush's presidency was a disaster; so was Carters. That does not mean I have bashed either of them. They just did not do a great job as national leaders. Next.

Darren Lenard Hutchinson said...

PS: KC - I neglected to reference this language in my post; it clearly shows that I have not moved any goal posts, but have stated that the original TARP legislation and regulations in both the Obama and Bush administrations permit bonus payments with TARP funds. If it is such an outrage now, then both presidents have presided over outrageous conduct that they could have prevented:

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.

Roy Lofquist said...

Darren,

From reading my comments I see that I could possibly be misconstrued as saying that the Democrats are the crooks here. One of my touchstones is the Mark Twain quote:

"It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress."
- Pudd'nhead Wilson's New Calendar

I really appreciate your efforts here. You are a Daniel Moynihan kind of Liberal. I am conservative in the Russell Kirk sense - not A Conservative. I claim Hubert Humphrey, Moynihan, the Bayh's and some others as my kind of guys.

I hope you keep at this. It is a joy visiting with you.

Roy

Kansas City said...

Thanks for the dialog. You have some interesting views. You're too tough on President Bush, but its obviously your view and your blog.

It is good to see a liberal who shows the intellectual honesty to criticze both sides; my perception is that there are not that many of you, and more on the conservative side who are willing to criticze both sides (George Will being a prime example).

By the way, I don't think there should be restrictions on bonuses under existing deals or some ban on bonuses. There should be some review and approval of new deals since the government has such a large stake in these companies.

I think it looks like President Obama may turn out to be a disaster, but I assume you like his aggressive approach on liberal causes. He certainly is trying to seize the opportunity.

I agree Carter was a disaster. I think he is a good man with bad judgment, which he has continued to demonstrate after his presidency.

I also agree with you that presidents get entirely too much blame and credit for the economy. I think a president probably could make a mistake or mistakes that really hurt the economy, and can do some things to help in bad times, but under ordinary times, they don't affect it much.

In any event, you have a thoughtful and interesting blog. Dodd is still a pompous blowhard. Time for a change.

Darren Lenard Hutchinson said...

My "defense" of Dodd has nothing to do with the merits of his job as a Senator. Instead, I am trying to have an honest debate. I defended Rush against the Demcratic folly - but I have no respect for him.

Too often, people allow their hatred for an individual to cloud debate. I think that's why you are trying to argue about "liberals" and Bush. The same probably applies with Dodd and some of the conservative attacks on him in this situation.

Because the government is pumping so much money into the banks, it can have a say in bonuses. This is just common sense, and it is perfectly constitutional. I have stated that once the bonus payment has been made, the presumption should swing to the other side: that the government has the burden of showing that reversing the deal is legal.

But even if the Bush or Obama had imposed regulations that impacted existing contracts before the payment had been made, this would be legal from my perspective. Why? Because the company has a choice. It can get governmental assistance but need to modify its relationship with its employees or forgo such assistance.

That's what we as a society say to "welfare" recipients. I don't understand why bankers need greater latitude, especially when their behavior has contributed to financial ruin.

Finally, please elaborate on your claim that Obama has an "aggressive approach on liberal causes." That's news to me!

Darren Lenard Hutchinson said...

Roy - I have never been compared with those guys, but thanks. I am probably closer to H. Humphery than anyone else on the list (from what I can recall), but I just consider myself a "maverick." I am definitely on the left side of the column, but over time I have become disgusted with party politics. When people place party above policy, then they legitimize bad decisions in the name of loyalty. That is a dangerous course of action. I started this blog to shake up things. Thanks for visiting.

Kansas City said...

I think Obama has been aggressive in arguing the proposition with a straight face that his initiatives on health care, education and cap and trade are somehow the answer to the economic problems of today and his budget proposals with massive increases in spending and government activity that will greatly change America. It is the whole "never let a crisis go to waste" mentality.

I had already said "There should be some review and approval of new deals since the government has such a large stake in these companies." But with respect to existing contracts, they should not be undone. It is not a matter of the company having a choice, it is a matter of the employee's contract rights. Of course, it the company and the employee agree to renegotiate the contract, even under pressure from the goverment, that is another matter and okay. It is just that the government cannot set aside the contract.

Real Time Analytics