Sierra Vista Herald – Published: Thursday, March 19, 2009

Congresswoman and other political leaders react to the $165 million bonuses for AIG executives

By Bill Hess

SIERRA VISTA – While it was proper that AIG received billions of taxpayer dollars to help the global insurance giant weather the economic downturn, the company’s use of $165 million of the money to pay executive bonuses was not, Arizona Democratic U.S. Rep. Gabrielle Giffords said.

Paying bonuses with taxpayer dollars to some of the executives who help create the financial woes for AIG was not only wrong, it teeters on being dishonest, she said during a telephone interview with the Herald/Review on Tuesday.

And, yes, she did vote for the eventual passage of the TARP bill, pushed by former Republican President George W. Bush and his Treasury Secretary Henry Paulson Jr.

But, how AIG is using the funds leads Giffords to question how Congress can better control the Troubled Asset Relief Program.

“The AIG situation is like pouring salt into an open wound,” said the representative, whose 8th Congressional District includes all of Cochise County. “I’m very angry, Congress is very angry, taxpayers are very angry.”

Gail Griffin, chair of the Cochise County Republican Party said, “The misappropriations of (TARP) funds is absolutely outrageous.”

Adding his disgust to what is happening is Bob Bland, chair of the Cochise County Democratic Committee, who said local members of the party are furious.

“People would like to assemble a firing squad and put AIG executives in front of it,” Bland said.

The continuing brouhaha is seeing bipartisan calls for bonus control as well as finger pointing with Republicans blaming Democrats and vice versa.

And, Giffords is coming in for a share of the blame.

A Wednesday release by the National Republican Congressional Committee, questioned why the Arizona Democrat voted for what the committee is now calling the “AIG stimulus bill” that allowed the company executives to receive the bonuses, courtesy of the taxpayers.

Using the word stimulus appears to try and connect TARP with President Barack Obama’s nearly trillion dollar stimulus bill that Congress recently passed.

However, Giffords said the TARP and the stimulus bills are separate issues and that the issue of AIG revolves around TARP funds.

In discussing the issue with the Herald/Review, the two-term congresswoman said that both House and Senate Democrats and Republicans supported the Bush TARP bill.

Additionally, on Feb. 5, the congresswoman expressed a need for restrictions on executive compensation as well as excessive bonuses.

TARP was “designed to stabilize the credit markets, not reward executives for their failures,” she said.

The congresswoman had already introduced a bill to curtail executive compensation for those companies that received TARP funds, and is a co-sponsor of another proposal to put constraints on executive salaries, bonuses and stock options for those who received or will receive TARP funds.

Legislative process was misused

Griffin noted that in the Senate, it was Democrat Chris Dodd, of Connecticut, who inserted language into the bill to allow the spending of the second half of the TARP money that all bonuses awarded prior to February would be paid.

And, she added it was interesting that the largest recipient of campaign donations in 2008 from AIG was Dodd, who received more than $103,000 from the company.

“Congressional Democrats and President Obama were asleep at the wheel on executive bonuses. Democrat Connecticut Sen. Chris Dodd crafted executive bonus protection inside the spending bill that President Obama signed last month,” Griffin said.

“Maybe next time Democrats will choose to have a fair, open and honest debate on legislation that affects Americans instead of crafting this kind of bill in secret and forcing a vote on a spending package that few members of Congress had time to review. The responsibility for this blatant misuse of taxpayer dollars falls squarely on the shoulders of the Democrats.” she said.

However, there seems to be an ongoing blame game in D.C., as some say Dodd did push the amendment to the TARP bill, while others are saying it was members of the Obama administration that forced the issue, with Dodd finally giving in to the proposal.

When it comes to the initial TARP bill, Bland said he doesn’t think any member of Congress, of either party, had time to read the bill and fully understand all the consequences of the more than $700 billion proposal.

“I don’t think they had time to do due diligence. I think that would have taken months,” he said, adding the bill had to be passed as soon as possible as an attempt to control the growing recession in the country.

AIG reported a loss of more than $61 billion in the last quarter and received $173 billion from the U.S. government, which now owns most of the company.

According to some news reports, AIG used some of the billions to pay off banks, some of which are non-U.S. entities, and other institutions to which it owed money.

The figures indicate U.S. banks, some of which received some TARP funds, were paid nearly $25 billion by AIG and foreign banks received slightly more than $37 billion.

And one of the companies AIG paid using TARP funds is Goldman Sachs, which received the special funds on its own.

At one time Paulson was the CEO of Goldman Sachs. Paulson, whose net worth is estimated to be $700 million, worked for Goldman Sachs for more than a quarter of a century.

The use of those funds to pay banks, especially those also on the receiving end of TARP money does not set well with Giffords.

Most frustration bonus centered

But, most of the frustration in Congress, as well as with the American people is centered around the bonus payments made by AIG, which many see as a major symptom of not caring for proper use of taxpayer dollars, the congresswoman said.

Giffords is part of a group of House members who are seeking a cap on executive salaries in companies that take TARP to be $500,000 a year – $100,000 more than the president of the United States receives. House members also seek redress through law to have the AIG bonuses either repaid to the government or heavily taxed. Giffords said such actions will not only tell AIG but other institutions receiving the special funds that they cannot continue as they have in the past when it comes to financial rewards for their employees.

When the United States is only paying hundreds of dollars a year extra in combat pay for its members of the armed forces who go into harm’s way, it is patently unfair that executives of companies like AIG are paid tens of thousands of dollars, the congresswoman said, especially in light that both types of payments come from the taxpayers.

“The AIG executives should not be proud of themselves,” she added.

Congress is working to overcome the problems highlighted by AIG and its bonus payments by seeking a 95 percent federal tax on the payments, up from the existing 35 percent to 60 percent, based on how much is paid. The other 5 percent will probably end up in the hands of states, Giffords said.

As for foreign AIG employees who received bonuses, she said efforts will be made to ask those nations that have a tax treaty with the United States to recoup those funds.

That means no one will walk away with any of the bonus money, she said.

And, Congress is working to close other loopholes that will inform companies who receive bailout money how the funds can be spent, the congresswoman added.

Bland noted that when it comes to union contracts they always can be renegotiated and he sees no reason why AIG’s employee contracts could not be renegotiated.

Giffords said hardly anyone in the country is happy with the AIG bonus fallout.

“Everyone is really, really, really, really mad,” she said.