Posted on 17 Jul 2009
When American International Group (AIG) paid out $165 million in bonuses to top executives in March, there was an outcry from Congress, the Administration and the public. But when news broke late last week about a second, $235 million round of AIG bonuses, the halls of Congress resounded largely with silence.
The almost uniform congressional shrug was particularly notable following the announcement that Goldman Sachs would be setting aside an $11.36 billion compensation pool for its roughly 29,400 employees. The per-worker amount is close to what Goldman paid employees in 2007, when Wall Street was seeing record profits.
“I think people are just picking up on it,” said Sen. Ron Wyden (D-Ore.), whose proposal to cap and tax bonuses was dropped in the last stimulus debate.
In the House, Financial Services Committee Chairman Barney Frank (D-Mass.) and Joint Economic Committee Chairwoman Carolyn Maloney (D-N.Y.) said they were still reviewing the specifics of the payments.
“I don’t want to change compensation, not company by company,” said Frank, who plans to introduce legislation that would change compensation structures so they no longer reward “excessive” risk-taking. “My problem is not the amounts; it’s the extent to which they give the wrong incentive.”
The relative silence has shocked financial services executives, who were preparing for another trip to the political doghouse.
“Our first thought was, ‘Oh God, not again,’” said one financial services executive when the latest AIG bonus news broke. “But it did not rise to that level.”
The issue has died, say lawmakers and lobbyists, for two reasons: Congress is overwhelmed on other major issues and the White House has done a 180-degree turn on the rhetoric. It also doesn’t hurt that the stock market has rallied a bit — the Dow is up 2,000 points since it bottomed out in March and rallied a whopping 257 points Wednesday alone.
While some in Congress argued that Goldman owed much of its record quarterly profits to the taxpayer-funded bailout, other members noted that the company had repaid the $10 billion in government funds it borrowed in June.
“As policymakers in Washington, we need to help foster more economic growth through encouraging other banks to follow in the lead of Goldman Sachs and repay their [Troubled Asset Relief Program] investment in a prudent and thoughtful way, because ultimately we will not be able to get our economy back on track if our financial institutions are not successful,” said Rep. Mike McMahon (D-N.Y.).
Only a handful of members, including self-described democratic socialist Sen. Bernie Sanders (I-Vt.), criticized Goldman’s payments and questioned whether the company also received additional government assistance through the Federal Reserve.
“It concerns me very much ... that we are not paying more attention,” said Sanders.