Americans are infuriated that several hundred employees of AIG received $165 million in bonuses after AIG had received $170 billion in public funds under the Troubled Assets Relief Program (TARP) to bail out the company and prevent its bankruptcy.
AIG passes through the money to provide insurance payments to some well-known Wall Street institutions, including Goldman Sachs, Merrill Lynch, Citigroup, Bank of America, and Wachovia, as well as several foreign banks.
AIG is viewed widely as one of those Wall Street companies that brought the United States economy to its knees, a company that would be bankrupt without the TARP funding Congress provided with the consent of two presidents, George W. Bush and Barack Obama, and two Treasury secretaries, Hank Paulson and Timothy Geithner, a bipartisan effort.
The public saw with their own eyes Sen. Chris Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, state during a television interview that he had nothing to do with writing language in pending legislation that authorized the payment of bonuses to AIG employees. But Treasury secretary staffers fingered Dodd as in fact being the person who wrote the enabling language allowing the bonus payments, with their urging.
To make matters worse, we then learned that the amount of the bonus payments was underestimated — it has grown from $165 million to $218 million. Furthermore, an increasing number of employees — now up to 400 — had received those payments.
The American public, unbelievably docile up to this moment, exploded with anger directed at AIG employees for taking the bonuses and at Congress and the president for enabling the bonuses to be paid. Then, everyone ran for cover, with members of Congress who voted for the legislation and the president who signed it vowing they would undo what had happened and demanding the money be returned.
The House membership threatened to tax the bonuses at 90 percent if the AIG employees didn’t return them.
If President Nixon, his administration and a compliant Congress had used the United States tax code to punish employees of a company seen as having engaged in legal conduct that they disagreed with, the press and government observers would have denounced Nixon and called for the removal in the next election of every involved member of Congress.
As the proposed legislation has been debated, President Obama has changed his position from support to questioning its wisdom, according to an Associated Press report of March 23.
“President Barack Obama wagered significant political capital . . . as he bucked a highly popular House measure to slap a punitive 90 percent tax on bonuses to big earners at financial institutions already deeply in hock to taxpayers. Obama defended his stance by saying the tax would be unconstitutional and that he would not ‘govern out of anger.’”
The witless Congress is seeking to direct attention from itself while the public, deprived of the facts bearing upon who is responsible for our economic plight, is understandably screaming for blood.
I believe that AIG never should have paid the bonuses and that Congress and the secretary of the Treasury should have made it a condition of TARP funding that such funding not be used to pay bonuses to anyone responsible for depleting corporate assets.
The government has failed us big time. In providing TARP money, Congress did not require that banks again lend money to creditworthy applicants to bring liquidity back to the markets, which was the stated purpose of creating TARP. Now Congress has failed the American public again by writing into law permission to pay the bonuses.
Given the public mood, because of the enormous pain and damage of economic collapse, there is an understandable desire for punishment. But let’s be real. In my view, the president should veto any legislation similar to the pending House confiscatory bill unless the Senate corrects it.
He also should propose legislation immediately for the creation of an extra-governmental blue ribbon panel with subpoena power to investigate who is responsible for the entire debacle. Those who were wrong should be held up to scorn. Those who committed illegal acts should be pursued criminally and, if convicted, should go to prison.
One thing is abundantly clear: There is a need to respond to the public’s reasonable demand for accountability.
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