Michael Reagan falsely claimed that in paying retention bonuses, AIG was following a law “that was written by the Democrats” that said “pay the bonuses.” In fact, the stimulus bill did not create the right for AIG -- or any company -- to pay bonuses, much less require them to do so.
On the March 26 edition of Fox News' Your World with Neil Cavuto, radio host Michael Reagan falsely claimed that in paying retention bonuses, AIG was following a law “that was written by the Democrats” that said “pay the bonuses.” While Reagan did not specify what “law” he was discussing, Republicans and media figures have advanced the falsehood that the economic recovery bill created a right for AIG to pay bonuses. In fact, as Media Matters for America has repeatedly documented, the American Recovery and Reinvestment Act did not create the right for AIG -- or any company -- to pay bonuses, much less require them to do so. Rather, AIG reportedly disclosed that it had entered into agreements to pay these bonuses more than a year ago, and the Bush Treasury department approved of the AIG bailout with this agreement in place. Furthermore, the relevant provision in the recovery act, which was based on an amendment by Sen. Chris Dodd (D-CT), actually restricted the ability of companies receiving money from the Troubled Asset Relief Program (TARP) to award bonuses in the future.
During the segment, Reagan also asserted that the 1977 Community Reinvestment Act (CRA) -- which is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods -- was among “all the laws that were in place that helped cause this.” By blaming the CRA, Reagan was echoing the conservative claim that efforts to expand homeownership among low-income and minority Americans caused the financial crisis. But actions taken by banks to expand lending to underserved communities, the focus of CRA, did not cause the financial crisis, according to Federal Reserve chairman Ben Bernanke, who stated in a November 25, 2008, letter: “Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.”
Further, Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that “studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.” Moreover, according to housing experts, a large percentage of subprime loans were not made by lenders governed by the CRA, which applies only to depository institutions. A study released in January 2008 by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.
On Your World, Cavuto previously asked Rep. Xavier Becerra (D-CA), "[W]hen you and many of your colleagues were pushing for more minority lending and more expanded lending to folks who heretofore couldn't get mortgages, when you were pushing homeownership ... Are you totally without culpability here?" Cavuto later said, “I'm just saying, I don't remember a clarion call that said, 'Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster.' ”
From the March 26 edition of Fox News' Your World with Neil Cavuto:
REAGAN: Yeah, I mean, what's going on back in Washington is like three-card monte, but they're trying to hide [Sen.] Christopher Dodd [D-CT] and [Rep.] Barney Frank [D-MA], who are the real culprits in all of this. And you look at what's going on with AIG -- most of the people who in fact might have been responsible for what happened at AIG are gone.
You have Jake DeSantis writing an op-ed piece yesterday in The New York Times, taking a buck a year. His organization within AIG makes $100 million profit. They give him an $800,000 bonus, and people go absolutely crazy. That's the money that's going to help repay the debt that AIG in fact has incurred by us loaning them money.
All this to hide the real culprits in Washington, D.C., because all the laws that were in place that helped cause this -- the Community Reinvestment Act -- Neil, are still in place today. They have not been rescinded. They haven't been moved. They are still in place today. My question is: Why are the laws that helped us get here still in place today? Because Barney Frank and Christopher Dodd and the Democrats want to pay back their friends.
CAVUTO: Well, even besides those laws that were in place and are still in place, there was a way you could check, just by opening up a simple file or the front page of what they call a 10-Q, which is sort of a rundown of what's happening at a taken-over firm -- in this case, AIG -- and you would clearly see that bonuses were handed out.
And if a lot of these in Congress, who have been arguing that after the massage weekend some months back with AIG executives, they would be like stink on you-know-what to make sure it didn't happen again, shame on them for missing it again, right?
REAGAN: Well, they missed it again. And, remember, AIG was following the law. The law said -- that was written by the Democrats -- pay the bonuses. They paid the bonuses. Now Washington is acting like they knew nothing about it, which goes to a point I've made on numerous occasions. Washington never reads the bills they vote on. They give them great names, great sendoffs, and then vote for them, and then later on, they find out, whoops, what did we do?
But, you know, at the same time, their friends that were running Fannie Mae and Freddie Mac, they got millions of dollars in bonuses. This goes on and on and on. You have Washington, D.C., before Christmas not voting to stop themselves getting a pay raise.
Why are we upset at AIG, who was following the law? Why not be upset at the people making the laws and not doing their job in Washington, D.C.?
CAVUTO: Well, to be fair -- to be fair, a lot of guys at AIG weren't following the law.