Backlash Forces Bonus Reconsideration
TPMDC reports on proposal to retract bonuses via tax: “Rep. Carolyn Maloney (D-NY), the chairwoman of the Joint Economic Committee, has a novel solution to the AIG bonuses flap: levy a 100% tax on the company’s senior executives for every bonus payment that’s not related to a commission.”
Daily Kos’ Dana Houle reports of a similiar proposal from Rep. Gary Peters: “…a 60 percent surtax on bonuses over $10,000 to any company in which the U.S. government has a 79 percent or greater equity stake in the company. Currently, AIG is the only company that meets this threshold.”
Beat The Press’ Dean Baker: “How about breaking off the financial unit from the rest of AIG and then take away the government life support? The highly valued executives can then try to get their bonuses from a hopelessly indebted company that has debts that exceed its assets by tens of billions of dollars.”
FireDogLake’s Jane Hamsher: “You own 80% of the company. If you don’t write the new check, AIG goes under and nobody has a job. People become remarkably amenable to rewriting their employment agreements at that point, even the ‘best’ ones who created the crisis” Also, FireDogLake launches petition: “No More Dough Till We Know Where It Goes”
ABC examines rising criticism from the Left: “…prominent voices on the left [are] voicing concerns that taxpayer-funded bailouts are enriching corporate America while doing little to right the nation’s economic ship … Several prominent Democrats are pointing out that Obama aides were more than willing to press auto workers to renegotiate contracts as a condition of bailouts for car companies — but are now citing the sanctity of contracts in AIG bonuses, saying they can’t be canceled.”
MyDD’s Tood Beeton and TPM’s Josh Marshall are “dispirited” by NYT report of White House response: “White House officials said the Treasury would recapture the bonus money by writing new requirements into a $30 billion installment of government aid scheduled to go soon to the ailing insurance conglomerate … But administration officials conceded that almost all of the most recent round of bonuses, totaling $165 million, had been paid last Friday … The officials said that people who received the bonuses would probably be able to keep them. By seeking to link repayment of the bonus money to the coming $30 billion in assistance, the administration seemed to leave open the possibility that the company would effectively be repaying taxpayers with taxpayer money. A Treasury official disputed that taxpayers would be repaying themselves, but could not specify how else the company would give back the money.”
LA Times still cautions: “It would be difficult, if not illegal, for the government to force the employees to return bonus money the company was contractually obligated to pay, employment law experts said.”
The Hill contends President Obama is more interested in helping small biz than multinationals: “President Obama’s economic policies so far have favored small businesses over multinationals, though the administration denies it is trying to split the business community. Obama has sought to invigorate small businesses through tax cuts and other policies designed to help small firms survive the recession. On Monday, he welcomed small-business representatives and lawmakers to the White House, and announced a new $15 billion loan program intended to spur loans to small firms. Obama has been much less generous with multinationals, which are the target of a $210 billion tax hike in the budget. The Obama budget calls for reform of a tax provision that allows multinationals to defer income from their subsidiaries until it is returned to the U.S.” More on small biz loan program from W. Post.
ThinkProgress keeps eye on Citigroup: “Did Citigroup CEO Vikram Pandit lie to Congress about his compensation?”
WSJ on Wall Street plans to maintain obscene salaries: “Some Wall Street firms are looking for ways to sidestep tough new federal caps on compensation. In response to expected bonus restrictions, officials at Citigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees, people familiar with the situation said.”
Washington Monthly’s Hilzoy: “the real issue isn’t bonuses. It’s your compensation, period. It’s the fact that, after doing your very best to wreck the world economy, you regard yourselves as entitled to levels of compensation that people who actually make things can only fantasize about. The bonus part is just the icing on the cake.”
Mother Jones’ Kevin Drum worries over Wall Street backlash to the populist backlash: “If they don’t get their bonuses, these guys might not only leave AIG, but turn around and do their best to make things even worse.”
ThinkProgress on McCain’s bailout flip-flops: “Last fall, as AIG teetered on the edge of collapse, then-Republican presidential candidate Sen. John McCain (R-AZ) came out against using government resources to rescue the firm. Less than 24 hours later, McCain decided that a bailout was necessary because, as he put it, ‘there are literally millions of people whose retirement, whose investment, whose insurance were at risk here.’ But today — after learning of the AIG’s plans to award $165 million in bonuses to its employees — McCain apparently decided that saving ‘literally millions of people’ from financial ruin wasn’t worth it: ‘If we hadn’t bailed out AIG[,] no bonuses for greedy execs.’”
Open Congress: “Look Who’s Scheduled to Appear Before Congress on Wednesday…It’s none other than A.I.G. Chairman and Chief Executive Officer, Edward M. Liddy.”
Oliver Willis reacts to W. Post piece declaring loss of “political captial” for Obama: “Nowhere, not a single place, in the entire article does the venerable Washington Post cite any data quantifying what they characterize as a ‘blow’ to President Obama. In fact, the entire enterprise sounds as if it could be sketched from a Boehner-Cantor-Limbaugh cocktail party.”
Will Backlash Force Nationalization Reconsideration?
Mark Blumenthal: “if the AIG story devolves somehow into a debate about bank ‘nationalization’ per se, public opinion may move in unexpected directions. The bigger and more overriding point here is that the AIG bonus story, which will inevitably fuel even greater unease associated with bailouts of banks and financial institutions, may make Americans even more eager for new regulation of those same institutions than they might have been before, and that may present Obama and his allies with as much opportunity as potential backlash. Yes, the anger over AIG creates the potential for a populist backlash, but it also creates the potential for support for greater regulation of banking and financial institutions across the political spectrum that would have been unimaginable a year ago.”
The Stash’s Noam Scheiber: “what I’ve been hearing from people on the Hill lately … is that the public would probably support some form of nationalization–so long as we didn’t call it that … My own view is that temporary seizure is the only way Obama’s going to get the support he needs to put more money into the banks. The anger and skepticism out there is just too intense–and justifiably so–for it to be possible without something that feels appropriately punitive (even if that’s not really the point) and final (as opposed to the latest in a never-ending series of bailouts). ”
Democratic Strategist’s Ed Kilgore: “it’s critically important that the Obama administration be viewed as only being willing to help ‘banks and other financial institutions’ when it’s absolutely necessary to ‘fix the economy’” while fighting like hell against any further abuses or misuses of taxpayer dollars. And that’s why the administration’s response to the AIG bonus issue, even as it prepares to make another $30 billion infusion of cash into the company, is so dicey but so important … [A temporary takeover] will immediately be labeled as “socialism” by conservatives, and that may be why the administration has avoided it. But as the AIG furor has documented, there’s some serious risk now that the President will be viewed as both enabling and deploring financial sector abuses, drawing attention to the waste of taxpayer funds even as he’s promoting more bailout money in the very near future.”
Wonk Room’s Pat Garofalo: “Nationalization, meanwhile, would mean outright control over the hiring and firing of executives and the payment of bonuses and dividends. Treasury wouldn’t have to try to coax or embarrass institutions into voluntarily cutting back.”
Time checks in on Treasury’s toxic assets plan: “‘The question of how to price the asset is still on the table, unresolved,’ says Scott Talbott a top lobbyist for the Financial Services Roundtable, an industry association.”
White House Looks To Mobilize For Progressive Budget
Faced with growing skepticism over aspects of his economic agenda, President Obama has launched an aggressive campaign-style offensive to bolster congressional supporters and marginalize Republican opponents.
Millions of campaign supporters are receiving e-mails urging them to call members of Congress. Groups allied with the White House are running ads scorning the president’s foes. States that were closely contested in the 2008 election are again getting visits from Obama.
On Thursday, Obama will even turn up in Jay Leno’s studio to appear on “The Tonight Show.” Candidates have often used late-night talk shows to highlight their lighter side, but no sitting president has ever appeared on one, NBC said.
The return to campaign-style tactics is intended to pressure lawmakers to back Obama’s plans in Congress, particularly his $3.6-trillion budget. That would be a tough sell in any environment, with lawmakers and industry lobbyists skeptical of sweeping and costly plans to revamp healthcare, convert to alternative fuel and stabilize the financial sector.
Complicating the president’s job were revelations over the weekend that insurance giant American International Group Inc. was paying $165 million in executive bonuses even though it had accepted a huge federal bailout.
News of the bonuses has threatened to stir a populist backlash against the rescue of AIG and other financial services, which in turn could raise voter concerns that the administration is squandering taxpayer money.
“There is a certain amount of bailout fatigue that’s settled on [Capitol] Hill, and something like this isn’t going to help,” said Jim Manley, a spokesman for Senate Majority Leader Harry Reid (D-Nev.).
W. Times looks at possibility of using Senate budget rules to circumvent filibusters on health care and global warming policies.
Bloomberg on business trying to use economy as excuse to block reforms
The Atlantic’s Chris Good on U.S. vs. S.C. stimulus “standoff”: “Well, it hasn’t quite reached that level of intensity yet, but that’s almost what’s going on between South Carolina Gov. Mark Sanford and the federal government. The anti-stimulus governor last week requested a waiver that would allow him to use some stimulus money ($700 million slated to be used for education) to instead pay off his state’s debts, sparking the ire of Democrats and some Republicans who insist that the money should be “spent” in the more traditional sense, to try to improve education and save teachers’ jobs. Today, the Office of Management and Budget turned down the request, stating that Sanford is bound by the stimulus bill (now the stimulus law) to spend the money as Congress has delineated … We’ll have to wait and see how much narrower the request gets (e.g. to use the money to pay off more narrowly defined, education-incurred debts?), and what OMB has to say about it.”
PCCC launches Fix CNBC petition/open letter campaign.
HuffPost reports: “officials say the group will follow up the letter with phone calls and a delivery event at the network headquarters — is to persuade the CNBC brass to prioritize investigative financial journalism over Wall Street ‘access.’”
Beat the Press’ Dean Baker beats W. Post’s Richard Cohen for his CNBC apologia.
Health Care Update
The Hill reports on GOP distress at business lobby participation in Obama health care effort, BUT the piece ends on this cautionary note: “…cooperation should not be mistaken for capitulation, industry lobbyists stressed. ‘I don’t see how this doesn’t start to break apart at some level at some point,’ [American College of Surgeons' Christian] Shalgian said. ‘We are very agile,’ [National Retail Federation's Neil] Trautwein said, ‘if we have to turn on a dime and oppose the package.’”
TNR’s Jonathan Cohn makes the case for taxing certain employee health benefits to fund comprehensive health care reform: “Instead of getting rid of the entire exclusion, you could limit it–and do so, perhaps, only for wealthier taxpayers … such a reform would generate more than $700 billion over ten years. That’s in the general vicinity of what we need, on top of Obama’s budget proposal, to achieve universal coverage. And the effect would be highly progressive, far more than the existing exclusion.”
China Goes Bargain Shopping
W. Post: “Chinese companies have been on a shopping spree in the past month, snapping up tens of billions of dollars’ worth of key assets in Iran, Brazil, Russia, Venezuela, Australia and France in a global fire sale set off by the financial crisis. The deals have allowed China to lock up supplies of oil, minerals, metals and other strategic natural resources it needs to continue to fuel its growth. The sheer scope of the agreements marks a shift in global finance, roiling energy markets and feeding worries about the future availability and prices of those commodities in other countries that compete for them, including the United States.”
NYT on China’s rise in the midst of global crisis: “The global economic downturn, and efforts to reverse it, will probably make China an even stronger economic competitor than it was before the crisis. China, the world’s third-largest economy behind the United States and Japan, had already become more assertive; now it is exploiting its unusual position as a country with piles of cash and a strong banking system, at a time when many countries have neither, to acquire natural resources and make new friends.”
Have no fear, Libya to the rescue! Reuters: “The National Oil Corporation of Libya may exercise its right to buy Canadian-owned Verenex Energy, blocking the China National Petroleum Corporation’s deal, the chairman of the Libyan company, Shokri Ghanem, said.”
Green Stimulus Update
Stateline on state role to make smart grid work: “Now that Congress has directed $4.6 billion in stimulus spending toward developing a ‘smart’ electric grid, it will be up to the states to get consumers on board and adjust rates to pay for the technology … Smart meters, for example, could instantly report to customers the cost of electricity at any moment … Some appliances even could be programmed to turn off automatically if power gets too expensive … Behind the scenes, new tools will also be able to quickly divert electricity around highly congested power lines, reducing the risk of costly and inconvenient power outages … But for the plans to succeed, state regulators must overhaul the rules they have used for decades to determine electric rates.”
The Perfect EFCA Message
OpenLeft’s David Sirota: “Harkin Delivers The Perfect EFCA Message … ‘In 1935, we passed the Wagner Act that promoted unionization and allowed unions to flourish, and at the time we were at around 20 percent unemployment. So tell me again why we can’t do this in a recession?’”
Politico on weaknesses in biz strategy: “Is the business community overplaying its hand on card check? … ‘That [secret ballot] argument is not going to hold up when senators see that the secret ballot is still an option for workers,’ said the AFL-CIO’s chief lobbyist, Bill Samuel. ‘Now they are shifting their argument, saying unions are bad for the economy. I don’t think that holds up since a lot of economists, including [White House adviser] Larry Summers, are saying collective bargaining helps spread prosperity across the economy,’ he added.”
Terrance Health contributed to the making of this Breakfast.