Legislative Update VIII

Yesterday, the House passed a bill to tax 90% of the AIG bonuses, but Republicans are slowing that legislation down in the Senate. Earlier in the week, the House also voted 321-105 to expand AmeriCorps and other national service programs by 175,000 participants. It would also create new groups to help poor communities with education, clean energy, health and services for veterans.

The Senate passed a long-delayed bill to set aside more than 2 million acres in nine states as protected wilderness, from a California mountain range to more than 1,000 miles of rivers. The 77-20 vote sends the bill to the House, where final legislative approval could come as early as next week.

The full Senate also confirmed Ron Kirk as U.S. Trade Representative and Elena Kagan as Solicitor General. The US Senate Committee on Commerce, Science and Transportation also unanimously signed off on the nomination of Gary Locke as Secretary of Commerce.

In The Category of Empty Rationales

I'm trying not to get too entirely caught up in the ranting surrounding the AIG bonus debacle, but this is too amusing/maddening not to mention. From Andrew Sorkin's column in the NY Times yesterday:

Now we can debate why A.I.G. felt it necessary to guarantee seven executives at least $3 million apiece when the economy was clearly on shaky ground. Perhaps we will find out these contracts were a bit of sleight of hand to enrich executives who knew this financial Titanic had hit the iceberg. But another possible explanation is that A.I.G. knew it needed to keep its people.

That is the explanation offered by Edward M. Liddy, who was installed as A.I.G.’s chief executive when the government effectively nationalized the company last fall. (He is being paid $1 a year.)

“We cannot attract and retain the best and brightest talent to lead and staff” the company “if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he said.

And in the NY Times this morning:

The bonuses that the American International Group awarded last week were paid to 418 employees and included $33.6 million for 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.

Really, there's nothing I can add to that.

UPDATE: I blogged too soon. David Leonhardt asks whether retention bonuses are even necessary to retain talent at firms like AIG. The answer, according to his research, appears to be no. Also, in general, Leonhardt's column is a good kickoff for a conversation we really ought to be having about executive compensation at large corporations. You may recall that we already had a national conversation about this earlier this decade, but the collapse of various individual corporations apparently was not painful enough to prompt serious reform. Of course, things are slightly different this time around.

Leonhardt says something else worth nothing:

The larger question is how to change the rules on corporate pay to reduce the odds of future crises. Throughout this crisis, policy makers, starting with President George Bush and Ben Bernanke and now including President Obama, have been a bit too deferential to Wall Street. That deference has fed populist anger, which threatens the political viability of the necessary continuing bailout of the credit markets.

The bonus scandal offers Mr. Obama and Mr. Bernanke a chance to get ahead of the curve — so long as they come up with changes that extend well beyond A.I.G.

I think Leonhardt is on to something here. This mess with AIG has damaged the credibility of the Obama administration, but it also presents an opportunity for the administration to use the populist anger it's generated to build political momentum for real reforms. The administration's handling of Wall Street thus far hasn't inspired any confidence in me that they'll recognize or seize this opportunity, but it's there for the taking nonetheless.

AIG Bonuses

Do you know what's most infuriating about this AIG bonuses debacle? That much of the anger directed at AIG and the executives and traders who will receive this money will spill over on the Obama administration. And deservedly so, in my opinion, as the Treasure Department "reluctantly" approved the bonuses even before news of them became public, and Obama himself apparently didn't become outraged about them until yesterday even though the Treasury Department has known for months that the bonuses would be an issue. And now Obama has ordered Treasure to "pursue every single legal avenue to block these bonuses" but the only plan proposed thus appears-ridiculously-to be a plan to "recoup" the bonus payments with future bailout money! It is not possible to overstate how weak it makes the Obama administration look that they cannot prevent the payout of egregious bonuses to the very people who produced the present crisis at AIG, even as the administration is lining up to give AIG another $30 billion. This will damage not only future efforts to contain the credit crisis on Wall Street (though who even knows what those efforts are yet?) but also efforts to get future stimulus legislation through Congress if and when it becomes necessary. What's truly angering is that this all appears to be an entirely self-inflicted wound. Had the Geithner and the Obama administration anticipated this crisis, they could've pressured AIG quietly in advance to ditch the bonus idea or forfeit the possibility of future bailout money. Now, they can only make a half-assed effort to get money back that's already been paid out, and run the risk of looking completely impotent in the face of AIG executives whose company is on the public dole. Unbelievable.

UPDATE: And now members of the Obama administration are trying to throw Sen. Chris Dodd under the bus, blaming him for a provision in the American Recovery and Reinvestment Act that allowed AIG to hand out bonuses last Friday (via Glenn Greenwald.) Except oops...that's not true. As Jane Hamsher explains, Dodd actually pushed for a provision that would've prevented such bonuses, and was talked back from it by-can you guess?-Geithner and the Treasury Department.  So to recap...the Treasury Dept. approves the bonuses, is caught off guard by popular outrage, then tries to blame Sen. Dodd for the mess (counting on useful idiots in the media and right-wing blogs) then Obama gets "outraged" yesterday, and now in Washington there is much weeping and gnashing of the teeth as Americans go hunting for their pitchforks and torches. All for $165 million, a pittance compared to the vast sums spent so far trying to repair our damaged economy. Well done fellas. Well done.