Wyden-Snowe amendment would have killed AIG bonuses
Kari Chisholm
As I wrote last month, Senators Ron Wyden and Olympia Snowe proposed an amendment to the stimulus package that would have barred bailout-fund recipients from paying huge executive bonuses (and taken back the ones paid last year.)
From the AP, back then:
The $838 billion measure includes an amendment penalizing companies that paid bonuses greater than $100,000 to executives after receiving government rescue funds last year. The amendment would require the companies to repay within four months any portion of the bonus above $100,000 or face an excise tax of 35 percent on the portion of the bonus above $100,000.
The Wyden-Snowe amendment passed the U.S. Senate. So, what happened? From the AP, today:
In February, the Senate voted to add such a proposal to the economic recovery bill that cleared Congress, but in final closed-door talks on the measure, that provision was dropped in favor of limits that affect only future payments."There was a lot of lobbying against it and it died," said Sen. Ron Wyden, D-Ore., who proposed the measure with Republican Sen. Olympia J. Snowe of Maine.
Of course, no one is taking the "credit" for stripping the Wyden-Snowe amendment from the conference committee version of the stimulus bill - but you can bet there's a lot of folks in D.C. trying to figure out who did the dirty deed.
[Wyden] said Obama's team is sending mixed messages on what will and won't be tolerated on bonuses, with the president coming out strongly against excessive Wall Street rewards but top officials not following through."The president goes out and says this is not acceptable, and then some backroom deal gets cut to let these things get paid out anyway," Wyden said. "They need to put this to bed once and for all."
As TPM reports, Senators Wyden and Snowe are planning to re-introduce their measure as stand-alone legislation:
Wyden and Snowe are now asking Treasury Secretary Tim Geithner to support their bailout bonuses measure, which could have prevented much of the current AIG flap and was scored as a money-maker for the U.S. government.The proposal would retroactively recover all cash bonuses to bailout recipients that exceeded $25,000, and companies that didn't return the money would be subjected to a 35% excise tax. (AIG, under this arrangement, would have had to pay about $58 million in taxes if it wanted to cling to its executive bonuses.)
Wyden and Snowe plan to quickly introduce their plan as free-standing legislation. In their letter, they remind Geithner:
The [stimulus bill] contained provisions that required you to review bonuses and "seek to negotiate" with TARP recipients regarding appropriate levels of compensation. This does not appear to have produced any results.Ouch.
There's more at the New York Times, Reuters, and even Fox News.
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4:36 p.m.
Mar 17, '09
Full disclosure: My firm manages Senator Wyden's campaign website, but I speak only for myself.
Mar 17, '09
[Wyden] said Obama's team is sending mixed messages on what will and won't be tolerated on bonuses, with the president coming out strongly against excessive Wall Street rewards but top officials not following through.
OK, I'm not going to jump on this on at all. Just curious, though. How many of these scenarios constitute a "that's the way this administration does business"? I'll be sporting, pick any level of pragmatic you want.
That phrase, "some backroom deal gets cut"... Did you ever see the Britcom "The Fall and Rise of Reginald Perrin", how every time anyone said, "mother in law", he had the mental image of a hippo? For some reason, when I hear that phrase, I see Nancy Pelosi smoking a cigarette. Good thing I'm barking mad.
Mar 17, '09
This has me boiling, hopping, screaming mad. I'm very relieved that Wyden had the foresight to not only go after prior bonuses, but to prevent future ones, but what the hell was the conference committee thinking?
Wyden needs more support within his own Democratic Caucus, and Obama needs an administration that reflects his values.
Mar 17, '09
Well fine... nothing like getting the mops and buckets out now. I have to believe people in the Treasury and Federal Reserve (i.e., Geithner) knew about these bonuses a good while ago - and the NY Times does too.
Whoever inserted the 'smoking exception clause' here, at least this doesn't seem to be one that can be laid on the beleagured conservatives/Republicans. As Obama and Pelosi have repeatedly reminded us... 'they won' - and 'they' controlled the House/Senate conference committees and final negotiations with the administration.
It's unfortunate for Dodd his name has become attached to the amendment in question here - and that he's the top recipient of AIG 2008 Congressional race donations to the tune of $103,000. Ouch!
Mar 17, '09
I'm wondering if the AGI employee recipients of these $1 to $6 million bonuses wer being paid hush money for keeping quiet about other far more eggregious goings on involving the Billions in bailout money.
7:32 p.m.
Mar 17, '09
While it is patently absurd that these executives should be paid bonuses in this situation, I'm not sure that this proposal actually would have prevented the bonuses. My understanding (and by all means correct me if I'm wrong) is that these are signing bonuses that are in the executives' contracts, meaning that they are legally enforceable. Even if AIG didn't want to pay the bonuses, and I bet that they actually don't considering the PR disaster it has gotten them into and their current financial straits, they are legally obligated to abide by the terms of the contract. All it would take is for an employee to file a lawsuit and any judge in the country would force the company to pay out the bonus. Even if this specific situation is outrageous, I'm not sure that we really want to advocate for companies being able to ignore legally binding contracts.
A better idea would be to basically tax the bonuses at 100%, which is the idea behind a bill discussed over at Daily Kos. I think that's a much more effective approach.
7:48 p.m.
Mar 17, '09
Nick-- Read Wyden's proposal again above. A tax is exactly what he proposed.
There are substantial problems with trying to levy an specific tax on executives now, after the fact. (See "bills of attainder."). Probably, a tax on AIG and others is the only option.
There are reasonable questions about the timing of the contracts -- if AIG knew it was going broke when it signed them, fraud may have been committed.
Mar 17, '09
Thank God they still have Sen. Dodd and Rep. Rangel in their corner.
Mar 17, '09
Nick - I think you are right, legal contracts are involved.
If Obama were to make them null and void that might open up a whole can of worms over at Ford, GM, or Chrysler. Precendent would be set for cancellation of private contracts by public shareholders and we all know the legacy costs dragging those ships down.
Chapter 11 is the way forward for all of these companies taking massive govt funds. Its really the only way to properly reset things.
10:02 p.m.
Mar 17, '09
I guess I don't understand the proposal then. What exactly do they mean by repay the bonuses/recover cash bonuses? That the company has to give an equivalent amount of the stimulus money back to the government or have the bonuses be taxed only 35%? If that is indeed the case, it seems to me like we'd only be penalizing a company for abiding by its contracts. And I would imagine that there's some way to make a bill like the one I noted constitutional.
Mar 17, '09
As I (and many others) suspected all along...
Washington knew AIG was preparing to pay bonuses
Mar 17, '09
He's really dancing around this one. Happy St. Patrick's Day!
8:13 a.m.
Mar 18, '09
More reasons to admire Senator Wyden and Senator Snowe for their principled leadership in the Senate. Who stripped their admendment out?
The AIG mess has been known much longer than the last 72 hour news slobber. The feigned outrage by the Republicans inside the beltway is getting stale.
8:19 a.m.
Mar 18, '09
While it's easy to point the finger at Dodd on this one, two recent posts I've read suggest that the Oministration was really behind killing the amendment, especially Geithener & Summers: here and here.
8:36 a.m.
Mar 18, '09
Dan's absolutely right. Geithner needs to be fired immediately, and Obama apologize to the Senator for having his spokesperson try to blame Dodd, when it was Obama's own Treasury gurus who had the provision stripped.
On "legally enforceable contracts:" 1) I sure didn't hear wall street or fox worry about contracts when it came to UAW contracts 2) Check Greenwald today: his legal suvey on the issue days the claim of unenforceability is mostly bunk 3) let them sue. Let AIG lawyers and execs defend their perfidy in open court. Oh, PLEASE.
Mar 18, '09
If that amendment had become law, it wouldn't really change things.
Let's say AIG paid $450 million in bonuses, then paid a portion of that amount to the federal government, then got another $30 billion from the federal government.
So what?
It would make more sense to tax any compensation at bailed-out firms above $400,00/year at 100%.
Mar 18, '09
Correct me if I am wrong, but didn't Senator Wyden vote for the stimulus bill? Why didn't he oppose it after the bonus penalty amendment was stripped out of it? Could have made a bigger deal about it at the time. Now it just looks like he is taking advantage of the outrage.
9:39 a.m.
Mar 18, '09
Now it just looks like he is taking advantage of the outrage.
There may be some truth in that - but the outrage is indeed worth taking advantage of. And not just by focusing on the bonuses, which are merely symptomatic.
The Administration's failure to get out in front of the bonus issue is part & parcel of the deeper issue of trying to resolve the fundamental problems at AIG et al. without actually taking them over.
Mar 18, '09
I'm with MSNBC's Rick Santelli.
"Raise your hard if you don't want the government using your hard-earned money bailing out these LOSERS."
You mean the suits at AIG, right Ricky?
12:10 p.m.
Mar 18, '09
Our local Sportsman's Warehouse just got bought out by another company which declared it would not be honoring gift cards sold to customers even just a couple of months ago (think Christmas gifts). Apparently this is legal, despite the contract of when the gift cards were bought. I'm supposed to believe the government couldn't have negated the bonuses of the AIG staff when WE bought an 80% interest in the company? Nonsense. What appears to have happened is Geithner & Obama bought AIG's line that they employees were "too big to fail" and enabled the bonuses. Their actions seem to indicate they don't see anything fundamentally wrong with the system and actions that led us here--tweaking regulations and reporting requirements or taxing back a couple hundred millions (though that MUST be done) is hardly going to make things better.
The financial gurus on Wall Street just spent 20 years creating a series of bubbles to continue to siphon off the Chinese loans to America that were covering up for our trade imbalances and falling real wages. They made out like bandits. They either knew what they were doing and didn't care or didn't know but should have (kind of like the rest of us--we who let China into the WTO without labor agreements or floating their currency so the change in balances could happen gradually instead of crashing overnight.) The mortgage-backed securities were an act of fraud involving nearly our entire financial and real-estate industries, with collusion from government. It's a huge disaster, but all the Congress and administration seem to want to do is to restack the same house of cards. It's just not going to work--the whole system needs to be restructured, and the basis of international trade and exchange needs to be restructured on a sustainable basis.
Mar 18, '09
Senator Wyden and Senator Snowe both voted for the version without their amendment. Various Republicans had asked for time to read the bill before voting on it. Senator Wyden and Senator Snowe both said there is no reason for them to read the bill before voting to spend trillions. Senator Wyden and Senator Snowe deserve no praise in my book.
Mar 18, '09
Re: "Correct me if I am wrong, but didn't Senator Wyden vote for the stimulus bill? Why didn't he oppose it after the bonus penalty amendment was stripped out of it?"
You're not wrong, jfwells. (And wasn't Obama also in favor of the non-stimulus bill?)
Wyden now represents the "far-left" of the DP. That's how far to the right the party has gone.
Remember last week?
The Savior said, "I am a New Democrat", at the end of a private meeting with a group of "moderate Democrats" (more "moderate" than the conservative Blue Dog Coalition, who are now "progressives" in comparison) on Tuesday afternoon.
"And what are Americans--who are losing their jobs and their homes because AIG acted like a casino and taxpayers paid off all their gambling debts--getting? They get to die...Meanwhile Ellen Tauscher is bragging that she and her New Democrat Coalition come from Wall Street, and work as henchmen for bank lobbyists. Of course they are -- the New Democrat's Executive Director, Adam Pase, was a lobbyist for predatory lenders. And bank lobbyists love them back, cooing about how the New Dems will keep Congress from 'punishing' banks with new regulation of the financial system." (Cancer Patients Die While 'New Dems' Help Bankers Get Billions)
The bipartisan economic position is not capitalism and not socialism; it's privatized profits for the rich and socialized costs and risks for the rest of us. That's what needs to be changed. Everything else, including this faux outrage, is bullshit.
Mar 18, '09
Wyden voted for the stimulus because it was going to put millions of Americans to work, educate millions of children, and provide a safety net for millions of unemployed Americans. Voting against the stimulus package because someone anonymously stripped his TARP-bonus amendment in a conference room he wasn't allowed in would have been penny-wise and pound-foolish, and might have cost the state millions when the Obama administration doles out the stimulus dollars.
Wyden did vote against TARP under Bush and under Obama, and those TARP votes were the votes that allowed these bonuses to occur.
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