Factcheck.org has weighed in on Dodd’s responsibility, or lack thereof, for the legislative language that allowed those bonuses (or, more accurately, did not stop them).
Some Republicans are blaming Democratic Sen. Chris Dodd of Connecticut for millions in bonus payments paid by taxpayer-owned American International Group.
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As it was passed in the Senate, the stimulus bill contained a strict prohibition on recipients of TARP funds paying “any bonus” to at least the 25 highest-paid employees – or more, at the discretion of the Secretary of the Treasury. The language is contained on page 736, and it said the Treasury Department’s regulations governing recipients of funds under the Troubled Assets Relief Program (TARP) “shall” contain:
H.R. 1, Senate version: … a prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period that the obligation is outstanding to at least the 25 most highly compensated employees, or such higher number as the Secretary may determine is in the public interest …
This language was authored by Dodd, who offered it as an amendment to the Senate bill on Feb. 4. He said it was aimed at quelling public anger over lavish pay for executives of bailed-out financial firms. “Many of our constituents are so angry with what they see in executive compensation, it is difficult to have a conversation about the larger questions,” he said. The amendment passed quickly on a voice vote.
As was widely reported at the time, Dodd’s language was much tougher than the White House wanted. No such language appeared in the version passed by the House. When the two versions went to a Senate-House conference to work out a final compromise, Dodd’s strict ban was rewritten. Most important, the final bill said the prohibition on bonus payments (page 404) …
H.R. 1, Final version: … shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.
In simple language, Dodd’s ban would have applied to AIG and any institution that had yet to repay TARP funds, regardless of whether existing employment contracts called for the bonuses. The bill that emerged from the House-Senate conference committee, and was signed into law by President Obama, only applies to bonus agreements made after Feb. 11.
This is yet one more demonstration that Dodd has been unfairly maligned. It does no more than repeat what was, at the time, a much publicized situation.
One interesting thing: the final language allows for valid contractually required bonuses “as such valid employment contracts are determined by the Secretary or the designee of the Secretary.” That means Geithner could still have held them up, by making a preliminary determination that they were not valid, or by, as majority shareholder, instructing his minion, Liddy, to hold off until he or his designee could investigate their validity. There seems to more than a scintilla of evidence that they were not arms length transactions.
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