AIG Ends Obama Honeymoon
The honeymoon for the Obama administration is definitely over. Two hours of testimony of American International Group (AIG) CEO Edward Liddy today before a Congressional committee called to investigate the AIG bonus scandal has accelerated the decline of public approval of the President and the growing disunity within the Democratic Party. President Obama essentially sidestepped talking about the issue today and Treasury Secretary Geithner actually refused to appear before the committee. At best it appears that the Obama administration has been inept at minding the store but now there are also questions asking why the bonus package got through the stimulus legislation prepared by the Democrats and signed by Obama in January.
Both sides of the aisle pummeled Mr. Liddy about how the bonuses came about, how knew about them, why were they needed, and what should be done now? For his part Mr. Liddy at times did seem like the proverbial deer in the headlights in painting a picture of poor or completely absent Federal involvement in the oversight of AIG which is now essentially owned by the American taxpayer. When Mr. Liddy tried to evoke sympathy for AIG employees who may have received threats by requesting that the names of employees be kept confidential for their protection. Almost every Congressman later said that the American people have a right to know where their money is being spent. An offer of returning 50% of the bonuses made by Mr. Liddy at the onset of his testimony did not find favor.
On the subject of contacts and communication with Federal agencies there was an appalling paucity. Usually CEOs have frequent meetings or at least send reports to their boards but when Mr. Liddy was asked about a special “Board of Trustees” involvement he could not even name one member. The Federal Reserve Board of New York named three in January 2009 to oversee the government’s 80% share of AIG. The trustees are Jill Considine, a former New York banking commissioner; Chester B. Feldberg, former chairman of Barclays Americas; and Douglas L. Foshee, president and chief executive officer of El Paso Corp. Asked about communication from the Treasury Department he reported that he had no first hand knowledge. The contact he seemed to have with the Obama administration was that Federal Reserve Board representatives have attended some meetings.
Mr. Liddy reported that AIG has been in contact with various members of Congress or their staff about the bonuses but none of the Congressmen at the hearing volunteered any further information. Congressman Paul Kanjorski (D-PA) got defensive at that remark and retorted to Mr. Liddy why he had not been keeping Congress up to date. Many sources are reporting that during the House-Senate Conference Committee hearings to get the stimulus package approved in January of this year there was knowledge of the bonuses to come and that preventative action could have been taken . Save for three Republican Senators and 11 Democrats the bill was passed as a Democratic initiative.
The justification for AIG to award bonuses to the some of the same persons who caused the fiscal crisis was not welcomed. While defending the bonuses as necessary to keep the talented people required to resolve the asset crisis at AIG , Mr. Liddy admitted that there were likely equally qualified people currently unemployed on Wall Street who could replace them. Another point of defense for the bonuses that Liddy tried to make about the risk of lawsuit damages from disgruntled employees for breach of contract was questioned severely by former lawyer Congressmen who replied that when Mr. Liddy was the CEO of Allstate Insurance Co. he made a reputation of taking contract disputes to court.
A few members of Congress accussed AIG of carrying out illegal activities. Congressman Steven Lynch (D-MA) echoed the feelings of many that a former contract attorney told Mr. Liddy that the bonuses were not legal because they insulated the employees from any risk of loss and tried to hide the true condition of the corporation. California Congressman Republican Edward Royce accused AIG of using the bailout money in an illegal scheme to purposefully undercut other insurance companies by underpricing their product.
Those eleven Democrats have grown to fifteen who are openly questioning the wisdom of the President and the liberal leaders of the Congress in passing such high spending bills. Senator Evan Bayh (D-IN) along with his colleagues are forming a “Moderate Working Group” which according to a statement from his office will “on the upcoming budget negotiations and the importance of passing a fiscally responsible spending plan in the Senate.”
The Obama administration says they just learned of the bonuses this week and Treasury Secretary Geithner says he just became aware of them last week. However, based upon testimony and other Washington revelations that have come out today there are growing questions about when Senate Democratic leaders in Congress first knew about the bonus provisions and why they took no action. Controversy is beginning to surround Senator Chris Dodd (D-RI) who has received over $9 million dollars in contributions over the past five years from Wall Street. AIG gave the most donations in 2008 to President Barack Obama $104,000 and then Senator Dodd at $103,000 according to watch group OpenSecrets.
The House Republicans who have been the objects of levity by the liberal media as the “ Party of NO” have clearly now been redeemed. As they predicted big government does not work because waste, negligence, favoritism, graft, and worse always follows.
Thanks for reading Contempo Magazine blog which discusses issues for McAllen, the Rio Grande Valley, and America from a conservative Hispanic point of view. Tony Magaña grew up in McAllen Texas, attended Texas A&M University, served as an officer in Army Reserve, and holds a doctorate from Harvard University. The co-founder of Contempo Magazine has participated in Valley business for over 20 years. He is a member of the National Association of Hispanic Journalists and also writes for the American Daily Revew
