American International Group, an insurance company that has received about $180 billion in taxpayer funds, this month paid $165 million in bonuses to executives whose bad judgment is largely responsible for the financial mess we're in.
Sen. Chris Dodd, D-Conn., the chairman of the Senate Banking Committee, wants the government to take back the bonuses. This is a change of heart for Mr. Dodd, because it was he who inserted in the "stimulus" bill an amendment which specifically protected from restrictions on executive compensation "contractually obligated bonuses agreed on or before Feb. 11, 2009." The amendment applied principally to AIG.
This apparent hypocrisy was not helpful to Mr. Dodd, who has been criticized for receiving a cut-rate loan from Angelo Mozillo, CEO of Countrywide Mortgage, one of the worst of the subprime mortgage lenders, and for his purchase of a $160,000 Irish "cottage" with the assistance of an insider trading felon for whom Mr. Dodd had arranged a pardon.
Why might Mr. Dodd have been so solicitous of the welfare of the AIG execs? Perhaps because last year he was the single largest recipient of contributions from AIG's political action committee and its employees, $103,100, according to opensecrets.org, which derived the information from Federal Elections Commission records. The second largest recipient of AIG largesse? Barack Obama, $101,332.
Mr. Dodd says the language in the stimulus bill was the treasury department's idea. Treasury is saying Secretary Tim Geithner didn't learn of the bonuses until March 10 and didn't tell President Obama about them until March 12.
It's difficult to say whether it would be worse if Mr. Geithner were lying, or if he is telling the truth. Let's assume he's telling the truth. The Wall Street Journal reported March 1 that treasury had approved the release of an additional $30 billion in Troubled Asset Relief Program funds for AIG. Even in the Obama administration, $30 billion is still real money. How could the treasury secretary have approved of an expenditure of that magnitude without knowing what the money would be spent on? Is anybody minding the store?
Associated Press reporter Julie Hirschfeld Davis suggests Mr. Geithner may be more dishonest than inept:
"For months the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts," she wrote Tuesday. "It wasn't until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back."
A billion is a thousand million. Some suspect the belated sturm und drang in Washington over the $165 million in bonuses is an effort to distract attention from what AIG did with the thousand times more money it received in federal bailout funds.
AIG released last Sunday a list of its counterparties (the firms to which it owes money). These were major European banks, plus U.S. giants Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley. There may be a good reason why these financial giants -- especially the foreign ones -- should be made whole at the expense of taxpayers who've lost about 40 percent of their life savings thanks in large part to the machinations of these financial giants, but to date, no one in Washington has offered it.
"The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already," wrote former New York Gov. Eliot Spitzer in Slate Tuesday. "AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation."
Perhaps there's a hint of an explanation in this: Employees of Goldman Sachs contributed $955,473 to the Obama campaign. Employees of CitiGroup contributed $653,468; employees of JPMorgan Chase, $646,058; employees of Morgan Stanley, $485,823.
Jack Kelly is a columnist for the Post-Gazette and The (Toledo) Blade ( firstname.lastname@example.org , 412-263-1476).