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New at TWI: Congress, White House Missed Many Opportunities to Prevent AIG Scandal

Since the beginning of the financial meltdown last year, Mike Lillis, The Washington Independent’s congressional correspondent, has been documenting the failure

Jul 31, 2020
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Since the beginningof the financial meltdown last year, Mike Lillis, The Washington Independent’s congressional correspondent, has been documentingthe failureof Congressand the Bush and Obama administrationsto place tough restrictionson executive compensation as the Treasury Department and the Federal Reserve shoveled taxpayer money out the doorto bail out [America’s largest financial institutions.
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Today, with AIG CEO Edward Liddy appearing before a congressional panel, Mike files this report:
On day four of AIG bonus-gate, the message from Capitol Hill has emergedas clear as it is unanimous: The $165 million paid this week to executives of bailed-out American International Group is “appalling,” “outrageous” and “a breach of public trust.”
Yet as pitchfork populism continues to fuel the congressional castigation, a vital element of the debate has gone largely ignored: Congress, going back to September, has had numerous opportunities to limit executive pay for bailed-out banks, only to ignore or abandon those efforts in the face of opposition from the finance industry, the White House or both.
The result has been that hundreds of billions of dollars in bailout funds have left Washington with virtually no conditions on how the money would be spent. The banks have taken advantage of that freedom, collectively paying out billions in bonuses, retention salaries and other perks to the same employees who helped run the companies into the ground. [...]
When Henry Paulson, Treasury secretary under the Bush White House, first unveiled the Troubled Asset Relief Program in September, the public wailed about the absence of conditions on the money. Congress intervened to add some limits on executive pay — provisions that Senate Banking Committee Chairman Christopher Dodd (D-Conn.) labeled “anything but mild.” But liberal critics of those compensation limits, including a number of congressional Democrats, pointed out loopholesallowing the companies to pay their executives virtually any sum they wanted. Most provisions, for example, apply only to companies receiving more than $300 million in TARP funds. [...]
In January, the House passed legislationplacing tighter restrictions on TARP spending, including tougher limits on executive pay. Senate Democrats, pressed by administration officials, never took up the bill.
A month later, after Congress released the second $350 billion in TARP funding, President Barack Obama tightened the restrictions on executive pay, but not without including a telling caveat: The rules wouldn’t be so strict that they would scare away the employees of recipient companies.
You can read Mike’s full story here.
Camilo Wood

Camilo Wood

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Camilo Wood has over two decades of experience as a writer and journalist, specializing in finance and economics. With a degree in Economics and a background in financial research and analysis, Camilo brings a wealth of knowledge and expertise to his writing. Throughout his career, Camilo has contributed to numerous publications, covering a wide range of topics such as global economic trends, investment strategies, and market analysis. His articles are recognized for their insightful analysis and clear explanations, making complex financial concepts accessible to readers. Camilo's experience includes working in roles related to financial reporting, analysis, and commentary, allowing him to provide readers with accurate and trustworthy information. His dedication to journalistic integrity and commitment to delivering high-quality content make him a trusted voice in the fields of finance and journalism.
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