AIG fallout burnishes some, taints others

After a week of talk over controversial bonuses
handed out to executives at AIG, those on the winning and losing end of the
political fallout are either licking their chops or licking their wounds while
wondering how long bonuses will dominate the news.

An eclectic group of winners may be hoping that bonuses at AIG and other
companies stay in the headlines after showing their political potency last
week.

{mosads}Perhaps the foremost beneficiaries are two Republican, would-be lawmakers who
have targeted their opponents over the bonuses, and House Speaker Nancy Pelosi, who seized on the AIG news and shifted the focus away from the House.

Not so lucky last week were Charlie Rangel, Chris Dodd, Timothy Geithner, and outraged Republican leaders who split on the hefty taxation of bonuses. 

Republicans were able to challenge Democrat Scott Murphy, running in the
special election to fill Sen. Kirsten Gillibrand’s (D-N.Y.) former House seat,
for having supported the final version of the stimulus package – which included
the loophole AIG exploited to award its bonuses.

With the competitive March 31 special election just over a week away, Republican
candidate James Tedisco and the National Republican Congressional Committee
(NRCC) were able to pounce on the issue, with Tedisco calling on Treasury
Secretary Timothy Geithner to resign.

Similarly, as a Senate challenge looms, former Connecticut Rep. Rob Simmons (R) was able to ramp up attacks on Dodd (D) for having allegedly help craft the loophole in the stimulus
legislation.

“Where’s the transparency in all of this?” Simmons said Thursday.
“The issue of executive compensation is obviously an important issue…you
would think someone’s reading the language of the bill.”

But while the GOP candidates may have been winners, their potential colleagues
face a mixed report card.

Republicans as a whole were able to flex their opposition party muscles, having
vocally criticized the Obama administration and Geithner for having been slow
to act or negligent on the bonuses. At least five Republican lawmakers – Reps.
Connie Mack (Fla.) and Darrell Issa (Calif.) and Sens. Jim Bunning (Ky.),
Johnny Isakson (Ga.), and Jim DeMint (S.C.) – called for Geithner’s
resignation, while others openly mused how long the Treasury secretary would
last.

But Republican leaders in the House were less successful in getting on the same
page. While expressing outrage toward the bonuses, Minority Leader John Boehner
(Ohio), Conference Chairman Mike Pence (Ind.), and Policy Committee Chairman
Thaddeus McCotter (Mich.) all voted against the 90 percent surtax on bonuses.
Minority Whip Eric Cantor (Va.) voted for the tax, but only after having been
coy about his intention before the vote. The whole party, meanwhile, was almost
evenly split on the tax.

And perhaps much to those Republican leaders’ enmity, Pelosi (D-Calif.) also managed a win last week. Pelosi quickly called for AIG
executives to return their bonuses and threatened action when the news first
emerged. And as focus shifted to the Senate’s role in including the bonus
loophole, the House version of the stimulus bill, pushed by Pelosi, largely
escaped scrutiny.

House Ways and Means Chairman Rangel (D-N.Y.) was not so lucky. Having
already come under scrutiny for his role in securing a tax break for AIG while
asking the company for donations to a building in Rangel’s honor, the
reemergence of AIG as Public Enemy No. 1 was hardly helpful. Rangel defensively
answered questions about his bill to tax AIG bonuses during a Thursday
interview on CNBC, and faced yet another critical article on the subject in his
hometown New York Times this weekend.

On the Senate side, Dodd was forced to answer a barrage of questions about his
role in creating the bonus loophole. At first denying responsibility for the
provision, and then pivoting to say the Treasury Department had requested its
inclusion, Dodd has become a top target of not just his 2010 opponent Simmons,
but Republicans nationwide. Along with Dodd’s numerous donations from AIG and
troubling poll numbers, a series of critical headlines were hardly a boon to
the Banking Committee chairman.

And perhaps no other figure in Washington faced more heat last week than
Geithner. With lawmakers beginning to call for his resignation, and allegations
from Dodd that his department was responsible for the loophole, Geithner has
found himself with his feet to the fire after less than two months on the job.

For President Obama, Geithner’s struggles have carried over to him. The
president had to answer questions not only about his stimulus package’s
inclusion of the bonus loophole, but also constant questions about his
confidence in his Treasury secretary.

But if there is one clear loser in the past week, it would be the different
companies receiving assistance under the Troubled Asset Relief Program (TARP).
Between new rules expected to be announced this week by the Obama
administration governing executive pay, the conflagration over AIG put
companies on notice that misuse of their financial assistance will now be met
quickly and publicly with repercussions in the form of new taxes, regulations,
or otherwise.

There is no CEO more acutely aware of that lesson after last week than
AIG’s chief executive, Edward Liddy. As the public face of the unpopular
company, Liddy was dragged to Capitol Hill and sometimes savaged by the media
for his company’s bonuses.

Liddy, though, is also a winner. While testifying before a hostile Congress is
no enviable task, Liddy managed to calm many lawmakers and didn’t stoke the
public ire against his company much more.

“Mr. Liddy is in no way responsible for these bonuses having been agreed to.
He, as a public service, agreed to come in and inherited a situation,” House
Financial Services Committee Chairman Barney Frank (D-Mass.) said during
Liddy’s testimony. “I disagree with some of the ways in which he‘s handled it,
but there ought to be a fair distinction between people who had a
responsibility for creating the situation and those given the responsibility
for handling it.”