New at TWI: Congress, White House Missed Many Opportunities to Prevent AIG Scandal
Since the beginning of the financial meltdown last year, Mike Lillis, The Washington Independent’s congressional correspondent, has been documenting the failure of Congress and the Bush and Obama administrations to place tough restrictions on executive compensation as the Treasury Department and the Federal Reserve shoveled taxpayer money out the door to bail out [America’s largest financial institutions.
Today, with AIG CEO Edward Liddy appearing before a congressional panel, Mike files this report:
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.”
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. [...]
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. [...]
In January, the House passed legislation placing tighter restrictions on TARP spending, including tougher limits on executive pay. Senate Democrats, pressed by administration officials, never took up the bill.
A month later, after Congress released the second $350 billion in TARP funding, President Barack Obama tightened the restrictions on executive pay, but not without including a telling caveat: The rules wouldn’t be so strict that they would scare away the employees of recipient companies.
You can read Mike’s full story here.