Minnesota Republicans in Congress jump on Obama’s AIG troubles

WASHINGTON, D.C. – On Capitol Hill, where one political party's misstep is often another's opportunity, Minnesota's Congressional Republicans are making the most out of the recent uproar surrounding bonuses that were paid to executives of American International Group.

Riding a growing wave of outrage on Tuesday, freshman Erik Paulsen, R-Minn., and other new House Republicans jumped on the chance to come together publicly, introduce their own legislation on the matter, and take a few quick jabs at their colleagues across the aisle.

"This is clearly another example of not only how Congress is broken, but how the administration has dropped the ball," Paulsen told reporters Tuesday afternoon.

Rep. Michele Bachmann, R-Minn., meanwhile, carried her message onto national TV with an appearance on "Larry King Live" late Tuesday night, followed by a cameo this morning on "Fox Business."

"I am simply stunned by the audacity of executives who even as they were able to retain their jobs by the grace of hard-working taxpayers, are unwilling to deny their million-dollar bonuses," said Bachmann. "But – and I say this as someone who voted against the financial service sector bailouts … I am equally stunned at the feigned surprise of those in government who say they are shocked by these bonuses." 

The message of fiscal irresponsibility is largely consistent with what most Congressional Republicans have been chanting since voting against Obama's stimulus plan, the second part of the Troubles Assets Relief Program, and the omnibus spending bill. But, now that the public has learned that insurance giant AIG paid its executives millions in bonuses after receiving billions of taxpayer dollars, it suddenly carries new weight, according to University of Minnesota political scientist Larry Jacobs.

"It seems to confirm what they have been saying," said Jacobs. "It is a wonderful, wonderful opportunity … The Republicans have been looking for something to jump on and this fell in their lap."

Even some of the fiscally conservative Blue Dog Democrats seized the opportunity on Tuesday to explain their wariness and lack of support for the bailout legislation.

"The potential for this kind of egregious abuse of taxpayer funds is one of the reasons I voted against the Wall Street bailout," Blue Dog Democrat Rep. Stephanie Herseth Sandlin of South Dakota said in a statement. "Last fall through today, American taxpayers' dollars have been used to bail out AIG. Taxpayers now own more than 80 percent of the company. It's time for liquidation. AIG's assets should be sold and taxpayers repaid."

Damage control
At the same time, other Congressional Democrats and the Obama administration have been in a kind of frenzied damage control mode, expressing outrage of their own over the situation.

Rep. Jim Oberstar, D-Minn., said on Tuesday that AIG's executives had made themselves "the poster children for the need to crack down on corporate greed."

"At a time when millions of hard working Americans are being laid off through no fault of their own and when union workers are forced to renegotiate their contracts for lower wages and fewer benefits, we are seeing AIG's top executives being richly rewarded for nearly bankrupting the global economy," Oberstar said.

Sen. Amy Klobuchar, D-Minn., took the Senate floor on Tuesday to denounce the bonuses. While Klobuchar stopped short of criticizing Congress or the Obama administration, she did join other Democratic senators in signing a letter to AIG chief executive Edward Liddy insisting that he immediately renegotiate the contracts.

"The American public is outraged by the arrogance and abuse of taxpayer funds, and so am I," said Klobuchar. "There is no rational way of justifying these bonuses to people who have caused untold damage to our economy."

Klobuchar joined her fellow Senate Democrats in proposing new taxes, some as high as 91 percent, on the bonuses if AIG does not recoup the funds on its own.

The House Republican legislation, on the other hand, would charge the Treasury with recovering the money within two weeks and would require the Treasury to sign off on any contracts that involve bonus payments in the future.

Who knew what and when?
AIG awarded more than $160 million in bonuses to current and former employees last Friday, according to a letter sent from New York's Attorney General Andrew Cuomo to Rep. Barney Frank, D-Mass. In the letter, Cuomo said that the top recipient received more than $6.4 million. The top 10 recipients received a combined $42 million.

The company has already received $170 billion in federal rescue money and is expecting another $30 billion in its next installment.

According to a White House timeline, Treasury Secretary Timothy Geithner first heard about the bonuses last Tuesday. The next evening, Geithner contacted Libby to find a way to stop the bonuses. President Obama was informed last Thursday and Geithner spent the weekend trying to negotiate the bonuses with Liddy.

But unanswered questions still abound, such as, why didn't Geithner know about the bonuses sooner?

AIG's bailout terms were set about six months ago, during the Bush administration  — a point, incidentally, that Congressional Republicans have chosen not to belabor.

Republicans have, however, pointed to a provision that would have taxed the bonuses, which was stripped from the stimulus during last-minute negotiations, as evidence that the matter has been an ongoing concern that everyone knew could eventually be a problem.

The amendment, which was sponsored by Sens. Ron Wyden, D-Ore., and Olympia Snowe, R-Maine, specified that a financial institution that took taxpayer money from the Troubled Assets Relief Program and paid bonuses to any of its employees of more than $100,000 had to pay the amount back in full within 120 days or face a federal excise tax.

Wyden and Snowe sent a letter to Geithner on Tuesday urging him to take another look at their amendment.

But, while the details over who knew what when and why more wasn't done to prevent it remain obscure, one thing is brutally clear: the Obama administration is on very thin ice, according to Jacobs. 

A recent Pew Research Center survey shows Obama's approval ratings have fallen since February, in part, because moderates think that he is listening less to the moderate Democrats and more to the liberals.

Whether or not that is actually true, there is the perception that it is true, and the current debacle feeds into that narrative, according to Jacobs.

"It taps into the kind of wealthy liberal argument of fiscal promiscuity," Jacobs said.

"Obama is in a very serious situation," said Jacobs. "This is one of those moments that could define his presidency."

Cynthia Dizikes covers Minnesota's congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.