AIG CEO Edward Liddy pleads for civility with a sometimes hostile crowd at Wednesday's congressional hearing. (WDCpix)
On day four of AIG bonus-gate, the message from Capitol Hill has emerged as clear as it is unanimous: The $165 million paid this week to executives of bailed-out American International Group is "appalling," "outrageous" and "a breach of public trust."
Illustration by: Matt Mahurin
Yet as pitchfork populism continues to fuel the congressional castigation, a vital element of the debate has gone largely ignored: Congress, going back to September, has had numerous opportunities to limit executive pay for bailed-out banks, only to ignore or abandon those efforts in the face of opposition from the finance industry, the White House or both.
The result has been that hundreds of billions of dollars in bailout funds have left Washington with virtually no conditions on how the money would be spent. The banks have taken advantage of that freedom, collectively paying out billions in bonuses, retention salaries and other perks to the same employees who helped run the companies into the ground.
Julian E. Zelizer, congressional expert at Princeton University, said the failure of policymakers to limit executive pay for bailed out banks was no accident. "Neither Congress nor the president wanted to look as if they were 'taking over' financial institutions," Zelizer wrote in an email, "nor did they want to anger business."
The result, he added, was "predictable:" a bailout strategy with plenty of leeway for the companies receiving the money.
Indeed, allowing most bonus payments to continue was a central element of both the Bush and Obama administrations' bailout strategies. When Henry Paulson, Treasury secretary under the Bush White House, first unveiled the Troubled Asset Relief Program in September, the public wailed about the absence of conditions on the money. Congress intervened to add some limits on executive pay — provisions that Senate Banking Committee Chairman Christopher Dodd (D-Conn.) labeled "anything but mild." But liberal critics of those compensation limits, including a number of congressional Democrats, pointed out loopholes allowing the companies to pay their executives virtually any sum they wanted. Most provisions, for example, apply only to companies receiving more than $300 million in TARP funds.
REST http://washingtonindependent.com/34551/white-house-congress-complicit-in-aig-bonus-scandal
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