Dodd Admits to Inserting Loophole Allowing AIG Bonuses

Posted March 18, 2009 at 6:20pm

Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) revealed to CNN on Wednesday afternoon that he was responsible for including a loophole in President Barack Obama’s $787 billion stimulus package that enabled American International Group to pay out millions in bonuses to its executives even as it continued to receive billions in taxpayer bailout funds.

Dodd had previously denied responsibility for the loophole, which enables not just AIG, but all companies who have received federal rescue funds to pay out bonuses to executives. Although it’s unclear if Dodd’s Democratic colleagues were aware of his role in the AIG bailout, it appeared that they were supportive of their colleague and sticking by him.

However, the Republicans have taken out the knives, both for Dodd specifically and Senate Democrats generally. Sensing a political opportunity, National Republican Senatorial Committee Chairman John Cornyn (Texas) indicated that the GOP would make an issue of taxpayer-funded executive bonuses not only in Dodd’s 2010 re-election race, but in the balance of next year’s Senate contests.

“I think there’s a collective responsibility on the part of Senate Democrats who passed the stimulus bill with very little support on our side, and who inserted a provision in the Conference Report that specifically [protected] the AIG bonuses that they now claim to be outraged about,— Cornyn said. “The Democrats won the election in 2008, they passed the stimulus bill and a lot of these bailouts basically on their own, and I think they’re going to bear responsibility in 2010.—

A senior Republican Senate aide said GOP Senators are not inclined to give Dodd a pass on this matter, in part because they are still infuriated with how the stimulus was —in their view — rushed through Congress with almost no input from them, and because Dodd was a central player for the party in passing the bill in its final form.

Dodd acknowledged to CNN that the amendment allowing for the protection of bonuses was his, but said he was responding to concerns from the Obama administration and that he wasn’t all that happy about including it in the stimulus bill signed into law last month. Dodd said he in fact favored limiting executive compensation.

“I agreed to a modification in the legislation, reluctantly,— Dodd told CNN’s Dana Bash. “I wasn’t negotiating with myself here. I wasn’t changing my own amendment. I was changing the amendment because others were insistent upon it.—

A Democratic Senate aide said earlier Wednesday, prior to Dodd’s admission, that the Democratic Conference was rallying around the Banking chairman. This source said Dodd favored cracking down on executive compensation for companies that accepted bailout funds as much as anyone — certainly more than the administration —and added that Dodd’s fellow Democrats are aware of this.

Senate Majority Whip Dick Durbin (D-Ill.) said as much Wednesday, in a brief interview before Dodd’s CNN admission.

“I just don’t think it’s fair criticism,— Durbin said, of the attacks that have been leveled at Dodd in recent days.