The Dishonest "Blame Dodd" Scheme from Treasury Officials

There is a major push underway -- engineered by Obama's Treasury officials, enabled by a mindless media, and amplified by the right-wing press
-- to blame Chris Dodd for the AIG bonus payments. That would be
perfectly fine if it were true. But it's completely false, and the
scheme to heap the blame on him for the AIG bonus payments is based on
demonstrable falsehoods.

Jane Hamsher has written the definitive post narrating and indisputably documenting what actually took place. The attempt to blame Dodd is based on a patently false claim that was first fed to The New York Times on Saturday by an "administration official" granted anonymity by Times reporters Edmund Andrew and Peter Baker (in violation, as usual, of the NYT anonymity policy, since all the official was doing was disseminating pro-administration spin). The accusation against Dodd is that there is nothing the Obama administration can do about the AIG bonus payments because Dodd inserted a clause into the stimulus bill which exempted
executive compensation agreements entered into before February, 2009
from the compensation limits imposed on firms receiving bailout funds.
Thus, this accusation asserts, it was Dodd's amendment which explicitly
allowed firms like AIG to make bonus payments that were promised before
the stimulus bill was enacted.

That is simply not what happened. What actually happened is the opposite.
It was Dodd who did everything possible -- including writing and
advocating for an amendment -- which would have applied the limitations
on executive compensation to all bailout-receiving firms, including
AIG, and applied it to all future bonus payments without regard to when those payments were promised. But it was Tim Geithner and Larry Summers who openly criticized Dodd's proposal at the time and insisted that those limitations should apply only to future compensation contracts,
not ones that already existed. The exemption for already existing
compensation agreements -- the exact provision that is now protecting
the AIG bonus payments -- was inserted at the White House's insistence
and over Dodd's objections. But now that a political scandal has
erupted over these payments, the White House is trying to deflect blame
from itself and heap it all on Chris Dodd by claiming that it was Dodd
who was responsible for that exemption.

Jane's post
documents this sequence of events without any possibility for doubt.
The debate that took place over limits on executive compensation for
bailout-receiving companies only occurred six weeks ago, and it is all
documented in the public press. Dodd was the one fighting against the White House in order to apply the prohibition to all bonus payments, i.e.,
to make the compensation limits retroactive as well as prospective. As
but one crystal-clear example that proves this, here is a February 14 article from the Wall St. Journal on the debate over executive compensation limits:

The
most stringent pay restriction bars any company receiving funds from
paying top earners bonuses equal to more than one-third of their total
annual compensation. That could severely crimp pay packages at big
banks, where top officials commonly get relatively modest salaries but
often huge bonuses.

As word spread Friday about the new and retroactive limit -- inserted by Democratic Sen. Christopher Dodd of Connecticut -- so did consternation on Wall Street and in the Obama administration, which opposed it.

Can that be any clearer? It was Obama officials, not Dodd, who demanded that already-vested bonus payments be exempted.
And it was Dodd, not Obama officials, who wanted the prohibition
applied to all compensation agreements, past and future. The provision
which shielded already-promised bonus payments from the executive
compensation limits ended up being inserted at the insistence of
Geithner. A spokesperson for Dodd, who is now consumed by these
completely unfair attacks, finally confirmed today that these
provisions were inserted at the direction of Treasury officials:

Senator
Dodd's original executive compensation amendment adopted by the Senate
did not include an exemption for existing contracts that provided for
these types of bonuses. Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made, including adding the exemption, to ensure that some bonus restrictions would be included in the final stimulus bill.

During the debate over these provisions, The Wall St. Journal
article identified above reported explicitly that it was Geithner and
Summers who were rejecting Dodd's limits on executive compensation as
too broad and demanding that already-vested payments be exempted:
exactly the exemption that protected the AIG bonuses and which they're
now trying to blame on Dodd:

The administration
is concerned the rules will prompt a wave of banks to return the
government's money and forgo future assistance, undermining the aid
program's effectiveness. Both Treasury Secretary Timothy
Geithner and Lawrence Summers, who heads the National Economic Council,
had called Sen. Dodd and asked him to reconsider, these people said.

At the same time, The Hill reported that "President Obama and the chairman of the Senate Banking Committee [Dodd] are at odds
on how to rein in the salaries of top executives whose companies are
being propped up by the federal government" and that "most of the
administration's concern stems from the Dodd's move to trump Obama's
compensation provisions by seeking more aggressive restrictions."
Let's repeat that: the Obama administration was complaining because
the compensation restrictions Dodd wanted were too "aggressive."

Yet
now, the Obama administration is feeding reporters the accusation that
it was Dodd who was responsible for the exemptions that protected
already-vested bonuses. The Times article from Saturday that started the Dodd scandal thus contains this outrageously misleading claim:

The administration official
said the Treasury Department did its own legal analysis and concluded
that those contracts could not be broken. The official noted that even
a provision recently pushed through Congress by Senator
Christopher J. Dodd, a Connecticut Democrat, had an exemption for such
bonus agreements already in place.

And yet another New York Times article from today
("Fingers Are Pointed Across Washington Over Bonuses") -- this one by
David Herszenhorn -- contains this White-House-mimicking, misleading
passage:

But Mr. Reid mostly ducked a question
about whether Democrats had missed an opportunity to prevent the
bonuses because of a clause in the economic stimulus bill, part of an amendment by Senator Christopher J. Dodd, Democrat of Connecticut, that imposed limits on executive compensation and bonuses but made an exception for pre-existing employment contracts.

That
was the exact provision that Geithner and Summers demanded and
that Dodd opposed. And even after Dodd finally gave in to Treasury's
demands, he continued to support an amendment from Ron Wyden
and Olympia Snowe to impose fines on bailout-receiving companies which
paid executive bonuses (which was stripped from the bill at the last
minute). But now that Treasury officials are desperate to heap the
blame on others for what they did, they're running to gullible,
mindless journalists and feeding them the storyline that it was Dodd
who was responsible for these provisions. And today, during his White
House Press Conference, Robert Gibbs advanced this dishonest attack by
repeatedly describing the offending provisions as the "the Dodd compensation requirements."

This is working because, as the White House well knows, Dodd is very politically vulnerable.
He is a major target of the Right because of his genuinely
questionable involvement with various banks, including his Countrywide
mortgate, and this story (fueled by the fact that Dodd is a receipient
of substantial AIG campaign donations), inflames those accusations. As
predictable as can be, right-wing news outlets like Fox, Drudge and others have blown this Dodd story up today
into a major scandal -- heaping blame for the AIG payments on Dodd --
and it was all started by Obama officials to ensure that no blame for
these provisions was laid where it belongs: at the feet of Geithner
and Summers.

I'm not defending Chris Dodd here. As I said, there
are all sorts of legitimate (though still unresolved) ethical questions
about Dodd's personal financial matters. And if he were responsible
for these compensation exemptions, then he ought to be blamed. But he
simply wasn't responsible. He opposed them vehemently (The Hill
at the time even noted that "Dodd is not backing down" from his
opposition to the exemption that Geithner/Summers were demanding, and Jane has much more evidence,
including the legislative history, conclusively demonstrating what
really happened here). Geithner and Summers obviously thought that the
exemption was justified when they were running around protecting those
past compensation agreements, and they simply ought to explain why,
rather than trying to sink Chris Dodd's political career in order to
protect themselves.

The only point here is that what the White
House and many journalists are claiming simply did not happen. They're
just inventing a false history in order to blame the politically
hapless Dodd for what Geithner and Summers did. And they're being
aided by a right-wing noise machine that knows Dodd is vulnerable and
which views the opportunity to blame the AIG bonuses on him, probably
accurately, as a final nail in his political coffin (Media Matters
today details today the right-wing falsehoods in the attacks on Dodd
by documenting that the claims against Dodd are inaccurate, but they
don't say who was actually responsible for the exemption). The next
reporter who writes a word about this or listens to anonymous White
House officials blame Dodd for these provisions might want to spend a
moment reading Jane's post and looking at the evidence showing what
actually happened, rather than mindlessly writing down what Rahm Emanuel these anonymous White House officials are whispering in their ears.

* * * * *

Speaking of The New York Times,
that paper asked six legal experts to opine for its online edition on
whether AIG would be able to evade the bonus obligations in its
employment contracts. My contribution to their forum can be read here and the others can be read here. Almost uniformly, the contributions demonstrate just how frivolous Summer's Sunday excuse was for the payment of these bonsues -- that the sanctity of contracts left no way out.

UPDATE: Just in case the point wasn't yet crystal clear, here is a Think Progress report from February 15, 2009,
reporting on the White House/Dodd dispute over the executive
compensation provisions. Is there any doubt which party was the one
demanding weaker and narrower executive compensation limits? (hint: it wasn't Dodd):

Having the White House blame Dodd (rather than itself) for this exemption is such a gross offense to the truth.

UPDATE II: Rather oddly, the NYT article I quoted above, by David Herzsenhorn, has been moved on the NYT site and is now at this link (see here). Most importantly, it has been re-written to reflect that fact that it was not Dodd who inserted the exception for past contracts:

But
Mr. Reid mostly ducked a question about whether Democrats had missed an
opportunity to prevent the bonuses because of a clause in the stimulus
bill, that imposed limits on executive compensation and bonuses but
made an exception for pre-existing employment contracts.

Senator
Christopher J. Dodd, Democrat of Connecticut, who initially proposed
adding executive compensation and bonus limits to the stimulus bill, did not include the exception.

In the place of the Herzsenorn article is now this article by Jackie Calmes and Louise Story that also includes the Dodd version of events:

Mr.
Geithner reiterated the Treasury position of that lawyers inside and
out of government had agreed that "it would be legally difficult to
prevent these contractually mandated payments."

That position was being questioned at the Capitol. Congressional Republicans, eager to implicate Democrats, initially blamed Senator Christopher J. Dodd,
the Connecticut Democrat who heads the banking committee, for adding to
the economic recovery package an amendment that cracked down on bonuses
at companies getting bailout money, but that exempted bonuses protected
by contracts, like A.I.G.'s.

Mr. Dodd, in turn, responded Tuesday with a statement saying that the exemption actually had been inserted at the insistence of Treasury during Congress's final legislative negotiations.

Something in the last couple of hours caused The New York Times
to change the way it is reporting this matter so that it is no longer
mindlessly reciting the false White House attempt to blame Dodd for the
bonus exemption, but instead is at least including a version of the
truth.

UPDATE III: I'm receiving email regarding the remarks Dodd made today on CNN
in which he stated that, at the White House's insistence and over his
objections, he agreed to include the pre-February, 2009 carve-out in
the stimulus bill. Some of these emailers have suggested that Dodd's
comments are at odds with what I wrote. They quite plainly are not.

The narrative I wrote here (and which Hamsher wrote in her post) both included exactly that sequence:

That was the exact provision that Geithner and Summers demanded and that Dodd opposed. And even after Dodd finally gave in to Treasury's demands,
he continued to support an amendment from Ron Wyden and Olympia Snowe
to impose fines on bailout-receiving companies which paid executive
bonuses."

I explicitly wrote that it was Dodd
who, after arguing vehemently against this provision, ultimately agreed
to its inclusion. And the statement from Dodd's office that I quoted
above included the same series of events ("Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made, including adding the exemption"). That's exactly what Dodd said today on CNN.

The
point was -- and is -- that Dodd was pressured to put that carve-out in
at the insistence of Treasury officials (whose opposition meant that
Dodd's two choices were the limited compensation restriction favored by
Geithner/Summers or no compensation limits at all), and Dodd did so
only after arguing in public against it. To blame Dodd for provisions
that the White House demanded is dishonest in the
extreme, and what Dodd said today on CNN about the White House's
advocacy of this provision confirms, not contradicts, what I wrote.

UPDATE IV: From the CNN article on the Dodd interview:

Dodd acknowledged his role in the change after a Treasury Department official told CNN the administration pushed for the language.

Both
Dodd and the official, who asked not to be named, said it was because
administration officials were afraid the government would face numerous
lawsuits without the new language. . . .

I agreed reluctantly," Dodd said. "I was changing the amendment because others were insistent."

It
was the Treasury Department -- at least according to a Treasury
official granted anonymity for the extremely compelling reason that he
"asked not to be named" -- that pushed for the carve-out, and did so
over Dodd's objections. That was the point from the beginning. That's
precisely what made it so outrageous that the administration was trying
to blame Dodd for a provision which Obama's own Treasury officials
advocated, pushed for and engineered.

Anyone who doubts Dodd's
opposition should just go read the above-excerpted articles which
reported contemporaneously about the dispute Dodd was having with the
White House over the scope of the compensation limits. For obvious
reasons, those real-time accounts are far more instructive about what
really happened than what the parties are saying now that everyone is
trying desperately to avoid blame for the politically toxic AIG bonus
payments.