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March 17th, 2009

‘Dodd Amendment’ protects AIG bonuses



Even as Congress finds itself getting into the punish-AIG frenzy, it seems that the AIG bonuses are protected by law:

While the Senate was constructing the $787 billion stimulus last month, [Connecticut Senator Chris] Dodd added an executive-compensation restriction to the bill. The provision, now called “the Dodd Amendment” by the Obama Administration provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” — which exempts the very AIG bonuses Dodd and others are now seeking to tax. …

Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org. Also, one of AIG Financial Products’ largest offices is based in Connecticut.

Kind of puts a different spin on things, doesn’t it? I’m not suggesting a quid pro quo here — Dodd denies inserting the provision, for what that’s worth — but this entire populist frenzy, of which Obama is a too-willing participant, is more than a little unseemly.

Here’s the thing: first, these bonuses were written into contracts months or years ago; the people getting them are legally entitled to them. So if the Obama administration wants it to be known that it can, and will, assume the power to unilaterally shred contracts — somehow, I think that will have a negative impact on the markets.

And second, we’re talking about $165 million in bonuses, which is about a thousandth of the bailout package. If Congress thinks it’s such a big deal, then deduct the bonuses from the bailout funds. Problem solved!

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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