Morgen on March 21, 2009 at 8:56 pm
Given all the outrage this past week over the retention bonuses paid to AIG executives, I find the lack of attention on the Bush Administration for their role in enabling these bonuses to be very curious. For the Democrats, blaming Bush is like legislating 90% tax rates…it just comes naturally. And as it turns out, it would have been very easy for them to do.
The original bailout measure (EESA) urgently pushed through by the Bush Admin last October included very detailed and specific restrictions on executive compensation for firms receiving money under the bailout measure. However, nowhere among these provisions was any restriction even close to what would have been necessary to curtail the types of bonuses that have generated this controversy. In brief, the EESA compensation restrictions applied to only a very limited number of top executives, and only applied to prior bonus arrangements if they were granted based on fraudulent financial statements. (A detailed summary of the EESA executive compensation restrictions is available here.)
The Bush Administration had a subsequent opportunity to further restrict executive compensation for AIG when they imposed the terms of the AIG bailout last November. A missed opportunity by the Bush Treasury run by Wall Street insider Henry Paulson? Well…not exactly. The terms of the AIG bailout agreement included several other compensation restrictions in addition to those imposed by EESA, as summarized in the table below. (click for full size)
Source: Office of the Special Inspector General for the Troubled Asset Relief Program, Initial Report to Congress – February 6, 2009
Pay particular attention to the 3rd paragraph in the column on the far right labeled “Requirements for Compliance”. As you can see, while the bailout measure for AIG included additional restrictions related to executive bonuses, the terms specifically allowed for the bonuses paid in 2009 to be up to 350% (!) higher than the executives’ total compensation in 2008! Stop and consider this for a moment and what it means given who was in charge when these terms were agreed upon. November 2008…Bush Treasury puts together AIG bailout…bailout agreement allows for 2009 bonuses up to 350% higher than 2008. The prosecution rests!
Given these facts, can there be any question that the Bush Administration is responsible for the fiasco with the AIG bonuses?? With all of their spinning and finger pointing at each other, the Democrats really seem to have missed a golden opportunity here to lay the blame for this right at the feet of their favorite target. Shhhhh! Let’s make sure to keep this quiet…we’ve really dodged a bullet on this.
Not so fast. For all their managerial blunders and ideological shortcomings, there should be no doubt that Obama and his team are masters of political calculation. There is one reason, and one reason only, that the ”blame Bush” drumbeat has not been beating incessantly since this scandal first came to light. (And it’s not because Obama thinks Bush deserves his silence). It’s called the American Recovery and Reinvestment Act of 2009…and the now infamous “Dodd amendment”.
See, the Democrats too had an opportunity to further extend executive compensation limits for bailed out firms – an opportunity which they readily seized. But in the dark of night, behind closed doors, and for reasons yet to be fully explained, a change was made by the Democrats writing the Stimulus bill which exempted all bonus commitments made prior to February 2009 from the much tougher compensation restrictions otherwise included in the bill. And weeks before this scandal even came to light, in this grand New Era of Accountability and Transparency, our President signed the Stimulus bill, and effectively approved each and every one of the AIG bonuses paid earlier this month.
I sincerely hope a more reasonable and responsible solution to the bonus dilemma is found rather than the most egregious retroactive tax legislation in the history of our Nation. However, there should be no confusion over who is now responsible for this situation.
All this feigned shock and outrage makes good theatre for the uninformed masses. But the Obama Administration and the Democrats in Congress now own this problem. And they know it.
Category: Politics |