Obama Backing Doddering Dodd?

President Obama feels that Chris Dodd is taking an unfair rap over his involvement in the Countrywide Mortgage mess (as a friend of Mozillo who got a sweetheart mortgage deal) and for his inclusion of a provision enabling AIG to pay executive compensation deals despite receiving federal bailout assistance, which has caused a stunning drop in his popularity in Connecticut. The President is using his prestige to prop up this clown?

President Obama is using his sky-high popularity to try to elevate embattled Connecticut Sen. Chris Dodd -- whose public approval tanked amid the fury over his role in the AIG bonus scandal.

"I will be helping Chris Dodd because he deserves the help," Obama told the Boston Globe in a phone call from Air Force One on Thursday. "Chris is going through a rough patch."

A recent Quinnipiac University poll showed 74 percent of voters blamed Dodd "a lot" or "some" for the $165 million in bonuses that went to employees of insurance giant AIG even as the firm got government bailout cash.

Dodd's own approval in the survey was just 33 percent -- nearly 40 points below Obama's.

What is it with this President and his need to support clowns who have violated the public trust and who skirt ethical and legal obligations? This isn't the first time the President has backed people who have ethical or legal problems; his list of nominees includes those who have cheated on their taxes or have been embroiled in the NYS pension pay-to-play scandal.

This President was supposed to change the tone in Washington, DC, but the only thing I see is that he's turning it into Chicago on a grand scale.

The Wedge Strategy Revealed Through Executive Compensation Attacks

The outrage over the AIG executive compensation and bonuses was phony and ginned up as I've repeatedly noted over the past few days, since both the Administration and Congress knew of these provisions and chose to exempt them from being regulated as a condition of receiving TARP funds and bailout money.

Instead, it appears that it was meant to lay the groundwork for the Administration to start demanding increased control over executive compensation - all executive compensation.

The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

The outlines of the plan are expected to be unveiled this week in preparation for President Barack Obama's first foreign summit meeting in early April.

Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving U.S. government bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire

This goes beyond reckless disregard for the market system to imposing a socialist regime on businesses that the Democrats do not like. The government is stoking populist outrage to further its agenda, claiming that executive compensation should be tied to performance.

Businesses already face the risks of poor business performance and compensation for executives is tied to that - even with the golden parachutes. The overwhelming majority of businesses in this country have corporate boards that are responsible for their business actions and will find themselves out of jobs if they do a poor job.

It's hilarious that Democrats are pushing this at a time when their own performance in Congress is abysmal. They're pushing trillions of dollars of spending as far as the eye can see and massively expanding the deficit, both of which would be as fiscally irresponsible as it gets. Yet, the same Democrats are refusing to alter their mandated pay raises. Why should these Congressmembers get raises for poor performances under their own rationale for controlling the private sector compensation system?

What this shows is the Democrats absolute disdain for the market economy and free markets where businesses can contract with employees - in this case business leaders - for compensation packages to manage the affairs of large corporations. If these businesses give outlandish compensation packages and suffer business losses, the outrage belongs on the business leaders and the corporations for the outsized compensation, but it is not the government's place to direct the compensation packages. It is antithetical to the market system and is a socialist answer to a problem that simply doesn't exist.

UPDATE:
Keep in mind that the government has routinely failed to maintain proper oversight based on its existing regulations and attempts to tighten up the lending standards were rebuffed because Democrats feared it would adversely affect minorities. This includes the SEC, which failed to pick up on the Madoff Ponzi scheme and other wrongdoings until the entities involved melted down in full public view. The SEC and Federal Reserve can barely handle its existing responsibilities, and yet the Democrats are pushing for an even larger role. They can't handle their current role.

Case in point is the fact that the SEC failed to engage in proper oversight of companies leading up to the credit meltdown (which led to a Geithner appointee to withdraw her name from consideration). Further, the Treasury Department isn't fully staffed at this late date with Obama appointees to see through any of Obama's policies and that Secretary Geithner continues showing himself to be inept at proffering a credible policy to deal with the ongoing problems in the credit market.

Phony Outrage Alert

The Administration and Congress have been slamming AIG this past week for doling out executive compensation packages and bonuses to employees despite AIG receiving TARP money (and for the record, AIG is being used as a conduit to prop up banks around the world for the credit mess that started with the "affordable housing" mess and credit defaults and toxic paper outside the TARP regime). They're busy railing on the $165 million (or is it $218 million) that AIG is going to be sending out to its employees in the next few weeks.

Congress, led by Rep. Charles Rangel (D-Tax Cheat/NY), has pushed for a 90% confiscatory tax on all income earned by individuals receiving the bonuses from companies that have received $5 billion or more in TARP aid. That ignores the economic benefits that the bonuses have on the NYC metro area economy, let alone the ancillary benefit that such money has around the nation. It also ignores that the bonuses reflect a fraction of a percent of what the government has doled out to the banks and AIG thus far in their quest to prop up the banking system. The amount here is a rounding error under usual Government math practices, but the real crime isn't the AIG bonuses, but the bailouts in the first place.

It's hilarious to hear President Obama claim that he was blindsided by the bonus situation, especially since Obama was busy railing on the bonuses back in January. His Administration also knew that these bonuses would be paid out and his Treasury Secretary knew that the bonuses would be paid because he and Sen. Chris Dodd (D-AIG/CT) pushed to get language inserted into the porkfest stimulus package to authorize those payments. The situation with the bonuses has been known for months, and yet Congress declares its outrage and demands accountability from the new CEO of AIG, who had nothing to do with the bonus compensation packages in the first place and was brought in to clean up the mess left by the prior leadership group.

Keep in mind that Congress provided a bailout to Citigroup, and set conditions on its executive compensation and bonuses. It chose not to do so with AIG.

Why is that the case? Well, AIG has quite the record with its lobbyists. They got quite the return on their dollar; spreading the money among top Democrats, including Barack Obama (in his capacity as US Senator), Chris Dodd, and others. Speaking of Dodd, it seems that his actions require far more scrutiny from the media and his fellow Senators. He's skated along despite clear evidence of benefiting from cozy arrangements with Countrywide Home Finance (friends of Angelo plan) and inserted the AIG provisos that enabled the bonus money.

The real issue is that the government is engaging in outrage and attempting to cover its tracks for its miserable handling of a mess that it initiated all those years ago in the name of affordable housing. One bad policy was tacked on to the next, like a house of cards, and the current bailouts are exacerbating the mess by throwing trillions of dollars into the marketplace to unstick the credit markets because banks don't know how much they have on their books and don't want to lend to those who are a credit risk (despite Congress demanding that they continue providing subprime mortgages).

What Zapping Bonuses Will Do To NYC Metro Economy

As I've noted previously, hitting the executive compensation packages will make the demogogues in Congress feel better, but it will harm the local economy. Badly. Let's start with real estate:

Manhattan apartment sales declined 23 percent last year as the Dow Jones Industrial Average fell the most since the Great Depression. Now co-operative and condominium prices are dropping as Wall Street firms cut the bonuses that contributed to the property market boom of the past decade.

A 50 percent reduction in bonuses would push down prices by about 24 percent from their peak through mid-2010, said Sam Chandan, chief economist at property research firm Real Estate Economics LLC in New York. That would mark the biggest slide since 1980 when appraiser Miller Samuel Inc. started tracking Manhattan prices.

“This will probably be the worst price correction the city has seen,” said Marisa Di Natale, senior economist at Moody’s Economy.com in West Chester, Pennsylvania.

When bonuses climbed 114 percent between 1998 and 2000, Manhattan co-op and condo prices followed, rising 51 percent during those years, data compiled by Miller Samuel show.

Sliding Prices

“If bonuses next year are expected at or below the current level, then prices will slide,” Miller Samuel President Jonathan Miller said.

Real estate prices slide, which means that all the related business - including furnishings and home goods will also slide. Expect sales of cars to slide further, along with all other kinds of service transactions, including restaurant business.

The slowdown in the financial industry has a ripple effect and the effects have been devastating on the state and local tax revenues. This isn't going to make the situation any better, even if the feds manage to pass their confiscatory taxes on executive compensation.

Rangel Leading Charge On Executive Compensation Taxation

You can't lose the irony on any of this. Rep. Charles Rangel, the New York Democrat who's managed to avoid paying taxes on real estate transactions for years, run afoul of House ethics rules regarding his parking spot, and generally thinks himself as being above the law, is leading the charge to impose a confiscatory tax of 90% on persons receiving the bonuses (executive compensation) at AIG and other companies receiving a bailout from the federal government.

The House is scheduled to vote today on a bill that would levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money.

"We figured that the local and state governments would take care of the other 10 percent," said Rep. Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee.

Rangel said the bill would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money.

House Democratic leaders unveiled the bill as the head of embattled American International Group Inc., which has received $182 billion in bailout money, testified about $165 million in bonuses paid out in the past week to about 400 employees in its Financial Products unit.

Funny, but no one in the House leadership is clamoring for the House to slam Rangel for his tax evasion or ethics troubles. The Senate had no problem confirming tax cheat Tim Geithner to head up the very Department that oversees the IRS - Treasury.

And yet, here we are with tax cheats demanding that those who are entitled to their compensation get taxed on such compensation at rates not seen since the 1950s.

What is all the more galling is that none of this would have been necessary had the necessary safeguards been put in place when the bailout packages were first announced. Instead, Democrat Chris Dodd of Connecticut stripped out those provisions in favor of language strictly protecting such compensation packages and lied about his role in doing so.

The Democrats own this mess and their outrage over the compensation packages is itself outrageous because the government ended up rewarding companies for failure with massive amounts of money to prop up businesses that made bad business decisions. If rewarding failure of executives is bad, how does spending 100 times that amount on the very companies that made those decisions make things any better? It does not.

Also keep in mind that AIG CEO Edward Liddy was chosen to clean up the mess at AIG and can say what he wants about trying to get his people to voluntarily give up their executive compensation packages.

What is truly galling is that the Democrats in Congress, along with the President, are trying to stoke populist anger against AIG and other corporations, all while skirting the truth that it was Congress itself that was responsible for this mess - the bailouts along with the allowances for executive compensation. If there is anger, it should be directed at the President and Congress, both of which knew that this executive compensation was to be paid.

Now, Congress and the President are rushing to try and fix their own mess by imposing the confiscatory taxes - with the charge led by tax cheats Rangel and Geithner. Classy.

UPDATE:
Tigerhawk makes the point about CEO Liddy more than I did above. Simply put, Liddy was brought in to clean up the mess, and yet he's the one that Congress is raking over the coals and demanding mea culpas from. An Instapundit reader also weighs in on the Congressional hearings yesterday and finds them wanting.

UPDATE:
Obama blames Congress for not informing him of the bonus provision (once again clearly showing that Obama did not read the porkfest before signing the monstrosity into law), but Rep. Chris Dodd (D-AIG) says that he inserted the bonus provision into the porkfest at the behest of the Administration.

Senate Banking Committee Chairman Christopher Dodd said the Obama administration asked him to insert a provision in last month’s $787 billion economic- stimulus legislation that had the effect of authorizing American International Group Inc.’s bonuses.

Dodd, a Connecticut Democrat, said yesterday he agreed to modify restrictions on executive pay at companies receiving taxpayer assistance to exempt bonuses already agreed upon in contracts. He said he did so without realizing the change would benefit AIG, whose recent $165 million payment to employees has sparked a public furor.

That part about him saying he didn't realize the ramifications to AIG employees is nonsense. Of course he knew what these packages are and what was inserted. If he didn't it shows his incompetence to lead the Banking Committee.

The Washington Post reports that the Fed sat on the knowledge of who was receiving bonuses, but didn't inform the President. Well, that falls on both Geithner and President Obama who has failed to fill the hundreds of positions at Treasury to help Geithner administer the organization during the current economic crisis.

This is the gang that can't shoot straight, but they sure know how to tax everyone all while avoiding those taxes themselves.

UPDATE:
Michelle Malkin links. Thanks!

UPDATE:
Here's the text of Rangel's legislation. The bill's effective date means that payments received prior to December 31, 2008 are not affected, but any such qualifying payments made between January 1 and the date of passage would be hit with the 90% tax. This is needlessly complicated, and everyone would have been better served had the original TARP legislation been read through by the members and Dodd prevented from inserting the critical text allowing the bonuses to go forward with the blessing of Congress and the Administration via the Fed.

UPDATE:
Qualified compensation that will get whacked at the 90% level is defined as "TARP bonus." That means any individual for any taxable year, the receiving the lesser of the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or the excess of-- the adjusted gross income of the taxpayer for such taxable year, over $250,000 ($125,000 in the case of a married individual filing a separate return).

TARP recipients are any person who receives after December 31, 2007, capital infusions under the Emergency Economic Stabilization Act of 2008 which, in the aggregate, exceed $5 billion, Freddie Mac and Fannie Mae, and any person who is a member of the same affiliated group or partnership who received the $5 billion in TARP funds.

Of course, lost in all this is the fact that the Treasury hasn't been able to track who got all that money, but there are hints of the large number of banks that would get hammered by it. It is probably one of the reasons that so many bank CEOs are rushing to get out of TARP - so as to avoid getting whacked by Congress wielding the confiscatory tax stick. They don't want to see their own compensation packages go up in smoke, because the government has decided to declare war on the banking industry.

Make no bones about this. The government is declaring war on the bankers with this move, which is unprecedented in history. They are singling out a single class of people who were lawfully entitled to compensation under their employment contracts and engaging in a massive tax grab all while ignoring the fact that their own members voted to allow precisely this kind of compensation package when first considering TARP.

This will further destabilize the markets and the banking system, and it will do little to encourage lending or for people to work with the government going forward since the government has shown that it can and will change the terms at will - without regard for the economic or social damage done.

Outrage Over the Phony Outrage In Congress Over AIG Bonuses

I'm outraged over the outrage being expressed by President Obama and Congress over the "discovery" that AIG executives were receiving more than $165 million in bonuses and that they're now demanding that the executives give back the money or that Congress will ram through a new tax provision to strip them of the money by imposing a 100% tax.

The rising congressional fury came as it was revealed that 73 AIG employees - from the toxic financial-products unit - snagged bonuses worth at least $1 million each, after taxpayers pumped in more than $170 billion to save the company.

With fury over the bonuses boiling over in every corner of the Capitol - and the White House revealing last night that President Obama didn't know about the payouts until Thursday, the day before the checks were mailed - lawmakers drew up plans to tax from 91 to 100 percent of the big payouts.

They pledged to act immediately to push the measure through Congress.

"If you don't return it on your own, we will do it for you," warned Sen. Charles Schumer (D-NY) in a speech.

Senate Majority Leader Harry Reid (D-Nev.) called the thought of executives keeping the bonuses "repulsive" and called it a sign of "greed and corruption on Wall Street."

Classy.

Possibly illegal.

And it's definitely two-faced. I don't expect Congress to give back their salaries for sending the economy into a tailspin and taking on such massive amounts of debt for porkbarrel spending and decades of social programs that have failed to achieve any of their goals (and the only solution being spending even more money because only money can solve the problems alleged).

Congress and the President knew that AIG would have to dole out these bonuses. They didn't do anything when writing out the bailout. At the time of the original bailouts, Congress could have required that the bailout money would not go to providing executive compensation or deferred compensation to its employees. That would have been acceptable.

Trying to tax the bonuses out of existence is a poor idea, and will likely slam everyone in the industry because the legislation needs to be sufficiently broad so as to avoid Constitutional law arguments.

People who are busy complaining and showing their outrage over the bonuses and claiming that this rewards incompetence ought to remember what they were saying when the same people - particularly in Congress were quick to provide hundreds of billions of dollars in bailouts to reward incompetence by propping up businesses that were failed or failing - including the automakers, financial giants like AIG, Citibank, Washington Mutual, Goldman Sachs, etc.

The bailouts reward failure.

The homeowner mortgage bailouts (both of them) reward failure by allowing borrowers who benefited from increasingly lax lending standards imposed on the banks by Congress and the President for years on end in the name of affordable housing to renegotiate their loans on terms more favorable than those people who scrimped and saved and did everything possible to continue paying their bills on time.

Do these people have short memories, or are members of Congress simply engaging in the typical demogoguery that one has come to expect? I would bet the latter.

I'm not alone in thinking that this is a whole bunch of faux outrage. Michelle Malkin also slams Congress and the President for their asinine statements. She also points out that many of the same people in Congress complaining about the bonuses aren't exactly clamoring to give back the AIG campaign contributions or roll back the automatic Congressional pay raises. Funny how that works.

And no one seems to know where all the hundreds of billions in bailouts have gone, let alone the $150 billion provided to prop up AIG to keep it from failing (which it still is). We're finding that the collapse is still occurring, just on a far slower pace that continues to require attention. And taxpayers continue to get soaked by a flawed policy that never should have been considered in the first place.

UPDATE:
Redstate and Instapundit also weigh in.

UPDATE:
Congress will be grilling AIG CEO Edward Liddy today. I'm sure that they'll try and make him rend garments, wear sackcloth, and tithe large sums to the Treasury, but in the end, Congress knew that they created this mess, and now they're putting the onus on AIG to fix it.

UPDATE:
Don Surber points out that it was just days ago when Press Secretary Robert Gibbs came to the podium to assure all Americans that the AIG money was being spent properly. When asked on March 2, 2009, Gibbs said yes. Now? Apparently Obama thinks there's political leverage to be had throwing AIG and contract law under the bus. GOPers are right to raise hay over this. What did the Administration know, and when did they know it. And why are they continuing to filet AIG when no one is bothering to do the same to Freddie Mac, even though they've got the same bonus provisions?

UPDATE:
Fannie Mae is also in on the retention bonus deal. They became a wholly owned subsidiary of the US government courtesy of their bailout/destruction of the real estate lending business, and yet where is the scrutiny of that organization by Congress? Again, the compensation packages are chump change compared to the hundreds of billions sunk by taxpayers to bail out these entities and businesses from their bad business decisions (and encouraged to do so by Congress).

AIG Bonus Plan Disclosed to Government Almost One Year Ago

From the New York Times:

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

***

Mr. Liddy, whom Federal Reserve and Treasury officials recruited after A.I.G. faltered last September and received its first round of bailout money, said the bonuses and “retention pay” had been agreed to in early 2008 and were for the most part legally required.

The company told the Treasury that there were two categories of bonus payments, with the first to be given to senior executives. The administration official said Mr. Geithner had told A.I.G. to revise them to protect taxpayer dollars and tie future payments to performance.

The second group of bonuses covers some 2008 retention payments from contracts entered into before government involvement in A.I.G. Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule.

That's right, when the government bailed out AIG last year, they already knew of the fact that these bonuses were to be paid out, and the government agreed that they were necessary and legal.

Additionally, as the New York Times article states, an amendment to the Executive Compensation Restriction Act, added by Democratic Sen. Chris Dodd, exempted these very bonuses.

While I agree that AIG should be stingy in its bonus structure, I am more outraged at the way the Obama administration attempts to play us, the people, and feign outrage over something that they already knew about, and the government already approved. Obama wants us to think this is news, when in fact it's history. The only recent turn of events is the fact that the bonuses are now due.