Despite jumping on -- and in some cases advancing -- false Republican claims that congressional Democrats are responsible for AIG executive bonuses, major media outlets have yet to report that a Bush-appointed special inspector general for TARP confirmed in congressional testimony that the Bush administration Treasury Department knew about the AIG bonus contracts and did not insist on their abrogation as a condition of AIG's receiving bailout money.
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Despite jumping on -- and in some cases advancing -- false Republican claims that congressional Democrats are responsible for AIG executive bonuses, major media outlets have yet to report that Neil Barofsky, a Bush-appointed special inspector general for the Troubled Asset Relief Program (TARP), confirmed in March 19 congressional testimony that the Bush administration Treasury Department knew about the AIG bonus contracts and did not insist on their abrogation as a condition of AIG's receiving bailout money through a stock purchase agreement signed by AIG and the Bush Treasury Department.
In prepared testimony for a March 19 House Ways and Means Committee hearing, Barofsky stated, "Preliminary information we have seen indicates that the TARP contract between AIG and Treasury that was entered into back in November specifically contemplated the payment of bonuses and retention payments to AIG employees, including AIG's Senior Partners." He also stated that his office "will be reviewing the process at Treasury with respect to Treasury's decision to authorize and approve such payments, both at the time it entered into the contract with AIG and since that time." During an exchange with Rep. Peter Roskam (R-IL) in the hearing, Barofsky explained that in AIG's November 2008 agreement with the Bush Treasury Department, "retention payments were explicitly contemplated" (transcript retrieved from the Nexis database):
REP. ROSKAM: You mentioned the online aspect of the disclosure of the TARP agreements. Would those online disclosures, as they're currently exercised by Treasury, would they have revealed the AIG problem?
MR. BAROFSKY: It would have revealed that in the AIG agreement with Treasury, retention payments were explicitly contemplated. It didn't list the contracts; it didn't list the amounts, but in the executive compensation provisions, there's an explicit reference to retention payments in calculating the total amount of payment a senior executive could receive. So that issue was, in fact, in those agreements.
REP. ROSKAM: So is it fair to say that if they had been online, that issue would have been red flagged and certainly drawn attention in advance to the problem?
MR. BAROFSKY: Potentially. I'm not sure of the exact date that the AIG agreement did go up on the Internet. Our recommendation was sort of adopted in waves after it was made in late December and is now being fully complied with. But I'm not sure the exact date the AIG agreement went up.
REP. ROSKAM: I understand.
Thank you. I yield back.
Indeed, the executive compensation section of the Bush Treasury Department's November 2008 TARP agreement with AIG addresses the "annual bonus for 2009" for "Senior Partners," including "all retention payments paid or payable to such Senior Partner under any retention arrangement between the Senior Partner and the Company for any period ending on or prior to March 31, 2010." The section states that such bonuses "shall not exceed 3.5 times the sum of such Senior Partner's base salary and target annual bonus for 2008." From the agreement:
(2) In furtherance of the Company's commitment to limit golden parachute payments to Senior Partners as set forth in Section 4.10(b)(1), and to ensure compliance with the provisions of the EESA Capital Purchase Program and the guidelines and regulations relating thereto applicable to Senior Partners pursuant to Section 4.10(b)(1), it is further agreed that the Company shall take all necessary action to ensure that the sum of (A) a Senior Partner's annual bonus for 2009, (B) all retention payments paid or payable to such Senior Partner under any retention arrangement between the Senior Partner and the Company for any period ending on or prior to March 31, 2010 and (C) any and all amounts paid or payable to such Senior Partner in connection with the termination of such Senior Partner's employment prior to March 31, 2010 which would be taken into account in applying the compensation limitation under Section 4.10(b)(1) above, other than any payments pursuant to outstanding awards under the Company's Senior Partners Plan, shall not exceed 3.5 times the sum of such Senior Partner's base salary and target annual bonus for 2008. For this purpose, actual annual bonus for 2009 and target annual bonus for 2008 will include supplemental bonus and quarterly cash payments under the Company's historic quarterly bonus program consistent with, and in amounts not exceeding, past practice.
The executive compensation section does not mention retention payments for other AIG employees.
Below are examples of major media outlets relaying in recent days Republican accusations that Democrats are responsible for the AIG bonuses. According to a Media Matters for America search*, none of these media outlets reported this disclosure about the November 2008 agreement -- despite highlighting Republicans' accusations that Democrats are to blame for the bonuses.
- The Washington Post reported on March 20 that after Congress' move to "levy punitive taxes on bonuses paid by financial firms receiving government aid," the "Republicans voiced strong objections to the tax approach, calling it a smokescreen for the [Obama] administration's faulty oversight of the Troubled Assets Relief Program." The article quoted Sen. Jon Kyl (R-AZ) as saying, "It sounds to me like these guys are trying to cover their tracks," and also reported: "Eager to blame Democrats as not preventing the bonuses, GOP lawmakers pointed to a last-minute tweak last month to the $787 billion stimulus package that allowed for bonuses that were signed in contracts before Feb. 11."
- The Associated Press reported on March 20 that "Republicans took Democrats to task for rushing to tax AIG bonuses worth an estimated $165 million after the majority party stripped from last month's economic stimulus bill a provision that could have banned such payouts." It then quoted House Minority Leader John Boehner (R-OH) as saying, ''This political circus that's going on here today with this bill is not getting to the bottom of the questions of who knew what and when did they know it.''
- USA Today reported on March 20 that amidst "finger-pointing between Republicans and Democrats ... Republicans assailed [President] Obama and Democrats in Congress for not aggressively moving to block the $165 million paid out to AIG workers last week. The firm has received access to $180 billion in federal funds since September." Later in the article, USA Today reported, "Much of Thursday's feuding centered on Sen. Chris Dodd, D-Conn., who chairs the Senate's banking panel. He inserted language in a recently passed stimulus bill that shielded the AIG bonuses."
- On the March 19 broadcast of the CBS Evening News, correspondent Wyatt Andrews reported, "Republicans charged that the AIG bonuses were made possible by a last-minute amendment to the stimulus bill, specifically saying the stimulus does not prohibit any bonus payment required by a written employment contract executed on or before February 11, 2009. Who would write that? It was Democratic Senator Chris Dodd of Connecticut, who blamed staff members at the Obama Treasury Department he refused to name." Andrews also said, "Republicans now want a full investigation of who went to bat for bailout bonuses and why." He then noted that "Democrats shot back that taxpayer-financed bonuses began last year under Republicans" and aired a clip of Rep. Barney Frank (D-MA) saying, "The decision to lend the money with no restrictions on compensation was a Bush administration decision." But Andrews did not mention that a Bush-appointed special inspector general made the same point in testimony that day.
- On the March 19 broadcast of NBC's Nightly News, correspondent Kelly O'Donnell aired a clip of Boehner saying, "Who knew what, and when did they know it?" and then asserted that "Republicans said it was the Democrats' fault." She later reported that there was a "clamor to identify some unnamed official who pushed forward change in the original stimulus bill that allowed AIG bonuses. Senator Chris Dodd had been behind an effort to limit executive pay and says it was the administration that thought the limits went too far."
- On the March 19 broadcast of ABC's World News, senior congressional correspondent Jonathan Karl reported that "on Capitol Hill today, the angriest voices were Republicans, who say blame for the bonuses lies with Democrats." He then aired a clip of Boehner saying, "This bill is nothing more than an attempt for everybody to cover their butt up here on Capitol Hill," and a clip of Rep. Michele Bachmann (R-MN) saying, "This is a scandal that's brewing in Washington. We need to have answers." Karl continued, "At issue: a tiny provision added into last month's stimulus bill that exempts employee contracts signed last year from new limits on pay. It's the loophole that made the AIG bonuses possible."
By contrast, a March 19 Bloomberg article reported: "The inspector general for the Troubled Asset Relief Program said today President George W. Bush's administration expected that bonuses would be paid at AIG in its November agreement to provide bailout funds to the insurer." The article continued:
The TARP contract between AIG and Treasury "specifically contemplated the payment of bonuses and retention payments to AIG employees, including AIG's senior partners," Neil Barofsky testified before a House Ways and Means oversight panel.
The political heat generated by the AIG bonuses indicates declining public and congressional support for shoring up beleaguered financial institutions with government funds and may make it tougher for President Barack Obama's administration to win approval for future bailouts.
The bonus decision "may jeopardize our ability to get the majority of this Congress to support further largess, to provide funds, to prevent a recession, depression or meltdown," Representative Paul Kanjorski, a Pennsylvania Democrat who heads the capital markets subcommittee, told Liddy at yesterday's hearing.
Republicans have criticized Democrats for tacitly allowing AIG to pay the bonuses due to language in a $787 billion economic stimulus bill that became law last month. The law, in effect, allows bonus arrangements at companies receiving taxpayer bailouts as long as the bonuses were in place before Feb. 11.
Some articles mentioned Barofsky's testimony but made no mention of his statement about retention bonuses. For instance, a March 19 AP article dealing specifically with news that "[a]t least 13 firms receiving billions of dollars in bailout money owe a total of more than $220 million in unpaid federal taxes" reported: "Neil Barofsky, special inspector general for the Troubled Asset Relief Program, told the hearing that if an executive signed a contract knowing that information about unpaid taxes was false, 'that would potentially be a crime.' He said his office will look to see if crimes were committed." The Post also mentioned Barofsky in a March 20 article about the unpaid taxes. It reported: "Neil M. Barofsky, the special inspector general for the bailout, said it should have been the Treasury's responsibility to ensure that banks were complying with the provisions of the bailout agreements. He said his agency would work with Treasury officials to solve the problem."
From the March 19 edition of the CBS Evening News with Katie Couric:
[begin video clip]
ANDREWS: And it came with an even stronger dose of partisan politics. Republicans charged that the AIG bonuses were made possible by a last-minute amendment to the stimulus bill, specifically saying the stimulus does not prohibit any bonus payment required by a written employment contract executed on or before February 11, 2009. Who would write that? It was Democratic Senator Chris Dodd of Connecticut, who blamed staff members at the Obama Treasury Department he refused to name.
DODD: They sought it; I didn't. They asked for the changes. They seemed reasonable in light of what we were going through at the time.
ANDREWS: Speaking on CNN late this afternoon, Treasury Secretary Geithner confirmed his department was worried that lawsuits over the bonuses might derail the entire stimulus.
GEITHNER: Treasury staff did express concern about whether this provision was vulnerable to legal challenge.
ANDREWS: Republicans now want a full investigation of who went to bat for bailout bonuses and why.
BOEHNER: Somebody knew this language was in there. I want to know who they were.
ANDREWS: But Democrats shot back that taxpayer-financed bonuses began last year under Republicans.
FRANK: The decision to lend the money with no restrictions on compensation was a Bush administration decision.
[end video clip]
ANDREWS: This is still going to cost the president, though, some very valuable credibility. The stimulus package, remember, was his number one legislative priority, and now officials are admitting they not only approved of this in advance, but they did so at failing firms, and they did it with public money -- Maggie.
From the March 19 edition of NBC's Nightly News with Brian Williams:
BOEHNER: Who knew what, and when did they know it?
O'DONNELL: Republicans said it was the Democrats' fault.
REP. STEVEN LaTOURETTE (R-OH): Today they're embarrassed. And their response? It's a typical Democratic response: Let's tax people.
O'DONNELL: Democrats blamed Wall Street greed.
O'DONNELL: Lawmakers under fire because the stimulus package that the White House wanted -- and Congress passed with only three Republican votes -- actually permitted scheduled bonus payouts. But today, both Democrats and Republicans voted for a fix: a 90 percent income tax on the bonus money if the company received more than $5 billion in government bailout funds. Part of the day was full of bluster.
KYL: Help us find out who that was.
O'DONNELL: A clamor to identify some unnamed official who pushed forward change in the original stimulus bill that allowed AIG bonuses. Senator Chris Dodd had been behind an effort to limit executive pay and says it was the administration that thought the limits went too far.
DODD: They came and said, look, we'd like to make some modifications.
O'DONNELL: Treasury officials say department staffers did advise Dodd that part of his proposal would not hold up because of existing employment contracts at the bailed-out firms.
From the March 19 edition of ABC's World News with Charles Gibson:
GIBSON: Good evening. As the old saying goes, "Don't get mad, get even." Well, on Capitol Hill, members of Congress, already mad, today added the even. The House passed a bill, taking dead aim at those bonuses paid to executives at AIG. Many in Washington have been asking, why weren't those bonuses to the executives at AIG blocked long ago? Well, today, Treasury Secretary Tim Geithner spoke up to take some of the responsibility. Here's Jonathan Karl.
[begin video clip]
KARL: Angry members of the House voted to take back the bonuses.
REP. EARL POMEROY (D-ND): The people have said no. In fact, they've said hell no and give us our money back.
REP. STEVE ISRAEL (D-NY): The only way to get their money back is to tax it back.
KARL: Approved by a 328 to 93 margin, the bill would slap a 90 percent tax on the bonuses of any employee making over $250,000 a year at any company that received federal bailout money. Shortly after the vote in the House, AIG turned over the names of its bonus recipients to New York attorney general Andrew Cuomo, despite threats on the lives of those employees.
In a statement, Cuomo said he'd conduct a risk assessment before releasing any individual's name. And it's not just AIG. Cuomo is also awaiting the names of Merrill Lynch executives who received $3.6 billion in bonuses late last year. But on Capitol Hill today, the angriest voices were Republicans, who say blame for the bonuses lies with Democrats.
BOEHNER: This bill is nothing more than an attempt for everybody to cover their butt up here on Capitol Hill.
BACHMANN: This is a scandal that's brewing in Washington. We need to have answers.
KARL: At issue: a tiny provision added into last month's stimulus bill that exempts employee contracts signed last year from new limits on pay. It's the loophole that made the AIG bonuses possible.
FRANK: The answer is: I was not involved.
DODD: I was not in the room.
SPEAKER OF THE HOUSE NANCY PELOSI (D-CA): If you want to talk about what happened on the Senate, go on the Senate side and talk to them.
[end video clip]
* Nexis search was "pub(NBC or ABC or CBS or Washington Post or Associated Press OR USA Today) and (Barofsky or inspector general or November) and (AIG or bonus! or retention or ((contract or agree!))) and date aft 3/18/2009" across the Nexis "U.S. Newspapers and Wires" and "Transcripts" sources. The transcript for the March 19 broadcast of the CBS Evening News was retrieved from the Factiva database.