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Minnesota Republicans in Congress jump on Obama’s AIG troubles

American International Group building in New York's financial  district.
REUTERS/Brendan McDermid
American International Group building in New York's financial district.

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.

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Comments (9)

This is not only is the wrong approach to getting to the bottom of this stupidity.

There is much yet to be determined here, and the public deserves to get the whole story. Among the mysteries, when the Stimulus Bill left the Senate, it had a bonus-protection provision; when it got through the House, it was modified to allow bonuses. Who...why...when...all these need to be broght to light REGARDLESS OF PARTY OR PARTISANSHIP. The suspicion is again lobby influence. If we are to have a fresh start in transparency, a better culture on Wall St., and continue to try to strengthen our banking system, partisan sniping is just more "same old same old".
Give it up!

This is a mess that will continue to spread as long as government keeps it's nose in the marketplace.

Although there are plenty of GOP rep's that caved, Paulson and Bachmann are two that stood their ground, and said "NO". This scandal proves the wisdom of their decision.

As to the parade of "outraged" Democrat legislators...pahleeze.

According to a Jan 23 MinnPost piece by Joe Kimball, Oberstar interrupted his righteous indignation at the Bush administrations handling of TARP phase 1 to assure us that under a Democrat government, these things wouldn't happen..

"He [Oberstar] listed the key provisions of the TARP Reform and Accountability Act."

"The legislation would:

• Limit bonuses for executives of firms participating in TARP."

Congress, the President, and certianly Tim Geitner knew what was coming, don't kid yourselves. And this is just the beginning; we are in for four years of such debacles.

I live for the day that Barney Frank will find himself on the other side of the table answering questions about what he knew, and when he knew it.

Is anyone in the press going to call these Republicans out and remind them that it was under President BUSH, not President Obama, that the original funding was passed?? And for it to pass, they required that there be NO stipulations as to pay, bonuses, etc.?

The press really needs to step up to the plate and do its job

Bush's fingerprints are on TARP I, Sheila (and we conservatives will never let him forget it), but Congress was then, and is now, firmly under Democrat control.

You may forget that the GOP House Caucus kept TARP from passing the first time. Unfortunately we didn't have enough Michele Bachmann's or Erik Paulsen's to stay on the correct course.

Barack Obama has been in office for almost two months. And now, in addition to a imploding economy, we have Russian re-armament and Chinese financial pressure going completely unattended.

The window for pointing fingers on the previous administration, deservedly or not, is quickly closing.

This just shows how Republicans will turn on their own, once they've been not only caught and shown to be guilty but then have become unpopular in public. It's OK to do the crimes and even be caught, as long as you can categorically deny all charges and slip away with a slap on the wrist or less. But if you manage to get the public riled up, then your previous enablers, supporters, mutual deal makers and back-scratching buddies will stab you in the back -- and blame the Democrats.

And then, almost as if on cue, from the AP....

Washington knew AIG was preparing to pay bonuses

SPIN METER: Shocked, shocked! Washington knew AIG details for months, rises in anger only now

"(WASHINGTON) Cue the outrage. For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn't until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back."

Also, for Sheila, some details.

The exemption you are thinking about is contained in "the Dodd Amendment", named after it's author, Senate Banking Committee Chairman Chris Dodd (Democrat-Conn).

It provides an exception for contractually obligated bonuses agreed on before Feb. 11, 2009, which exempts the very AIG bonuses Dodd et. al. are screaming bloody murder about.

We call it "the old soft shoe".

When the whole, ugly picture is laid out, the press is actually doing the Democrat party a favor, don't you agree?

We have no moral obligation to AIG. You can't make agreements behind the government's back, but they did. This was a crony operation, cronyism gone wild. The key guys should go to jail. The officers of Goldman Sachs should be in prison, in protective custody, so they can't run away and can't steal any assets. But the government is afraid people would say this is an attack on capitalism. But the Brits are tending toward nationalizing their whole banking system, as they did with Northern Rock.

The whole world system is bankrupt, and must be put into bankruptcy reorganization by the governments. "`But that's socialism!' some will scream. `I stole it fair and square. You can't take it from me!'" But we can. It is high time for a new Pecora Commission.

Watch Larouche deal with these guys on his webcast on March 21 at 12 Noon.

Mr. Swift -- The "problems" with Russia did not arise since January 20.

Problem #1 is the insane idea that Russia would not feel threatened if we put nuclear missiles in Poland and the Czech Republic (neither of whose citizens wanted such a thing).

Problem #2 was our sponsorship of the eventual winner of the election in Georgia, our subsequent arms buildup and our and Israel's training of Georgia's new army. Georgia then invaded South Ossetia, which wants to be part of Russia, destroyed much of its capital city and killed between 200 and 1000 of its citizens. Russia then came to South O's rescue, BUT we portrayed it as a Russian invasion. As the BBC noted a week or two later, the U.S. seemed to be rewriting history.

Problem #3 is our attempt to convince NATO to permit eastern European countries to become members, even though Russia was promised at NATO's creation that it would never, ever do such a thing.

After all these things, plus our badmouthing of Russia no matter what it does, Russia has finally decided to take steps to protect itself FROM US. And what do we say to that? We say Russia is becoming more and more belligerent and is therefore a Problem for us.

Overhaul of US foreign policy anyone?

I appreciate your presenting Russia's side of things, Bernice.

I'm sure that Vladimir Shvarev would heartily approve of your version, but the facts are that after approval by the Polish legislature the United States placed 10 defensive, anti-ballistic missiles in Poland, not nuclear missiles.

President Bush repeatedly invited the Russians to join with us in an "anti-missile" coalition, with the promise to share technology...unfortunately the Russians said "nyet".