Chris Dodd vs. Tim Geithner:
There’s a match-up that wasn’t anywhere to be seen on Barack Obama’s March Madness bracket last week. But, in truth, it may have been the only one that really mattered in his mind.
Dodd, the 6-foot senior senator out of Connecticut, is at the heart of the AIG bonus scandal. Just about everyone is blaming him for the provision that let the company use federal bailout money for the $286 million worth of payouts.
Dodd is blaming Geithner.
But Geithner, the one-man-show at the Treasury, is claiming that he didn’t really push as hard as Dodd is saying, that it was up to the legislators in the end anyway. Though he’s quick to defend the provision’s legal grounding, Geithner claims to be as surprised by the bonuses as anyone.
Facing pressure, Obama had to make the call: admit that his man Geithner had made a mistake or turn the cheek to Dodd and let the public, the media, and the Republican party pounce on the guy. Obama chose the latter — as easy as picking Duke or UCLA.
But is this just politics at its worst? Does Dodd really deserve all of the blame?
To answer that, let’s go back to mid-February, just after the House and the Senate approved the American Recovery and Reinvestment Act. Before the bill went to a conference committee, Dodd inserted a provision that would have severely restricted executive bonuses in companies receiving TARP (Troubled Asset Relief Program) money, at least until that money was repaid. Notably, the provision was retroactive, thus encompassing the questionable AIG contracts that had been signed before the insurance company’s problems set in.
A New York Times article from Feb. 14 called this retroactive effect “the biggest difference between Mr. Dodd’s provision and the Treasury rules,” as Geithner had only wanted future compensation to be limited.
As the article says, “The legislatively imposed pay curbs are, in essence, a bad report card for the Treasury Secretary … for failing to be tough enough on companies getting bailout money.”
Dodd supported his provision strongly, telling the media that its survival would set the tone for how this and future bailouts would work. Talking with the Associated Press, he even sent out a warning to Obama, saying that if the provision were changed, Congress, and the people, might be hesitant to rally behind the president in the future.
“[Future bailouts] will never happen as long as the public perceives that there are people getting rich,” he said. “Save their pay or save capitalism.”
And yet the provision didn’t survive. So what exactly did happen?
Just before the bill went to the conference committee, in which Dodd did not participate, the Obama administration pushed for Congress to limit the provision’s scope. Perhaps they feared the legal repercussions; perhaps it truly was a move to appease the businessmen. Either way, by the time the conference concluded, a new clause had been added to the act.
It stipulated that Dodd’s proposition “shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009.”
In a rush to get the stimulus money out, the bill went to vote right away. Maybe Dodd, chairman of the Senate Banking Committee, could have been more stubborn by pushing back against the new clause and its champion — Tim Geithner. But at that point, it would have been politically useless and, if it caused a delay in getting the stimulus to the people, definitely not worth the costs.
Considering the anti-Dodd backlash that has emerged since, it is perhaps most important to note that Dodd never actually vouched for the new amendment, the one that let the AIG execs claim their bonuses. It wasn’t his idea.
Connecticut voters will have the chance to look at Dodd’s record in 2010. And they certainly deserve to see it.
Since his presidential campaign flopped early last year, the career senator has been plagued by scandal after scandal. There’s his sweetheart deal with Countrywide Insurance. And his unusual real-estate venture in Ireland.
Now these AIG accusations, the very ones that Dodd doesn’t entirely deserve, are threatening to fundamentally change the political landscape of Connecticut and D.C.
March Madness indeed.
Sam Breidbart is a sophomore in Branford College.