Don’t Blame Chris Dodd For The Bonuses
Sen. Chris Dodd, facing the lowest approval ratings of any Senate Democratic incumbent,is in political purgatory. But on the subject of AIG’s bonuses, he doesn’t deserve the bad rap. Dodd is being blamed for OKing a proviso in the American Recovery and Reinvestment Act guaranteeing previously sanctioned employment contracts. He faces intense political pressure because of his long-standing friendship with bankers and lenders, which has made him a key player in the negotiations between financial institutions and the government. In a statement yesterday, Dodd called on AIG executives to voluntarily refuse their bonuses. The truth is that the codicil was added in conference by mutual agreement of House and Senate Democrats and the White House. At the time, the administration worried about both the perception and the reality of government’s interfering in the decisions and internal operations of the banks. Backstopping employment contracts was controversial to critics, but to an administration that was trying to work with the banks, it was an easy call. The worry was that the banks would suffer immediate and disasterous brain drain if the govenment could abrogate (the world of the week!) employment contracts willy-nilly. Apparently, no one at the Treasury Department or the New York Federal Reserve Board bothered to check on what those contracts actually contained – therein was the sin of omission, if you can call it that. How many tens of thousands of employees does AIG have? And didn’t Geithner recuse himself from dealing with AIG?
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