This week, Republican leaders have leapt to join the populist outcry against the bonuses that ailing insurance giant AIG has awarded its executives. But such rants against executive earnings mark a remarkable about-face for the right flank of the party, which condemned President Obama’s decision to set limits on executive pay just last month.
“I really don’t want the government to take over these businesses and start telling them everything about what they can do.” Minority Leader Mitch McConnelltold ABC News in February, when asked about Obama’s proposed limits on executive compensation. Senator Jim DeMint, who attacked the original bailout bill as “pure socialism,” characterized executive pay caps as a dangerous government intervention. “I think it’s a sad day in America when the government starts setting pay, no matter how outlandish they [sic] are,” DeMint told the Huffington Post. “This is just a symptom of what happens when the government intervenes and we start controlling all aspects of the economy.” DeMint’s right-wing compatriot, James Inhofe, also equated limits on compensation with the demise of the American way. “As I was listening to [Obama] make those statements I thought, is this still America? Do we really tell people how to run [a business], and who to pay, and how much to pay?”
A mere six weeks later, DeMint and Inhofe are now attacking the administration for failing to curb these executive payouts. In a long diatribe delivered on the Senate floor on Tuesday, Inhofe abandoned his earlier defense of businesses to make their own decisions about compensation to express his “deep anger” over the pay. “I don’t know how someone at AIG giving out or receiving a bonus right now can look at themselves in the mirror,” Inhofe thundered on the floor. “You can be sure that we will do all we can to right this wrong and get these bonuses back.” DeMint has also found ways to channel his newfound anger against corporate pay. In a letter sent to the Senate Banking Committee yesterday, DeMint, along with David Vitter and Jim Bunning, demanded that AIG contracts be formally subpoenaed to determine why the company was “specifically exempt[ed]” from the executive compensation limits. In other words, DeMint is now asking why AIG hasn’t been forced to comply with the conditions that he had so vehemently opposed.
What was once emblematic of a free-market economy–the ability of private industry to determine its wages–is now the sign of a Democrat-led “fiasco” caused by a “lack of transparency and accountability,” in the words of DeMint’s letter to the Banking Committee. Of course, there are plenty of good reasons to be steamed about AIG’s bonuses, but it sure would be nice if Senate Republicans spared us the rank hypocrisy next time.
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Boehner V. McConnell on Executive Compensation
February 04, 2009 11:54 AM
On Monday, Senate Minority Leader Mitch McConnell, R-Ky., suggested he doesn’t like the idea of limiting executive compensation.
“What you have to do, it strikes me, is have some kind of parameters that don’t have the government basically running the private business,” McConnell said, according to ABC News’ Jonathan Karl. “It is a tough challenge. I think we are all appalled by these — some of these executive salary arrangements and bonus arrangements and perks and all the rest. On the other hand, I really don’t want the government to take over these businesses and start telling them everything about what they can do. Then you truly have nationalized the business. So it is a delicate dance to try to prevent blatant abuses and still not have the government as a result of taking an equity position in the government telling them, for example, you can’t pay dividends or you can’t — I mean, things that are just ordinary business practices. We have to resist the temptation to basically dictate to these businesses how to run every aspect of their operation.”
On the other hand, this morning House Minority Leader John Boehner, R-Ohio, sounded quite amenable to the idea.
“I think if anybody is looking to the taxpayer to help bail their company out, these kinds of executive compensation limits are appropriate,” Boehner said, per ABC News’ Dean Norland.
Asked a reporter, do you think $500,000 is the appropriate cap?
“I think somebody’s got to pick a number,” Boehner said. “The president has picked one. I applaud him for doing it.”
Sen. Jim DeMint (R-S.C.) said Thursday he won’t filibuster the financial bill, but is leaning against the financial bill and described it as “pure socialism.”
“No, but I have said that I’d like a chance to read it and to make sure we let the American people know what it is, so it’s not a secret vote,” DeMint told reporters after leaving a Senate GOP lunch attended by Sen. John McCain (R-Ariz.).
DeMint, a staunch fiscal conservative, also defended McCain against Democratic claims that McCain’s presence at the Capitol Thursday was interfering with delicate, last-stage talks on the financial bill. DeMint said McCain has particularly helped persuade reluctant House Republicans to support the bill.
“I think the fact that McCain drew so much attention to theis has really helped people make some decisions and work together,” DeMint said. “What we’ve done is been able to move away from the president’s plan, which I think is just pure socialism as far as government-run economy. We need to move back from that, and hopefully we can use loans. I hope McCain will talk about the need for Treasury to do this as loan system that help these banks work out of this mess rather than a bailout solution where we’re throwing money at it.”
–J. Taylor Rushing
Wall Street bankers, with their $18 billion in bonuses, private jets and gaudy conferences, are causing headaches for the GOP.
President Obama has proposed capping compensation for executives at banks that take taxpayer bailout money at $500,000. Republicans hate the idea — a position puts them uncomfortably on the side of people currently about as popular as child-porn producers and subprime mortgage brokers.
Senate Minority Whip Jon Kyl (R-AZ) blamed the “tone deaf” bankers for creating the political environment that allows Obama to call for a cap.
“Because of their excesses, very bad things begin to happen, like the United States government telling a company what it can pay its employees. That’s not a good thing in America,” Kyl told the Huffington Post.
“What executives have done is troubling, but it’s equally troubling to have government telling shareholders how much they can pay the executives,” said Sen. Mel Martinez (R-FL).
Sen. James Inhofe (R-OK) said that he is “one of the chief defenders of Obama on the Republican side” for the president’s efforts to reach across the aisle. But, said Inhofe, “as I was listening to him make those statements I thought, is this still America? Do we really tell people how to run [a business], and who to pay and how much to pay?”
Democrats argue that banks that take government money must accept any rules the government decides to send with it. Massachusetts Sen. John Kerry and Rep. Barney Frank are both working on legislation that would complement Obama’s attempt to get a handle on executive compensation.
It’s not a novel concept, and it’s one the GOP supports — when applied to welfare recipients, at least. “We demand that welfare recipients do an honest day’s work for their checks. And now, since President Obama laid down the law Wednesday, we demand that the guys who ran our banking system into the ground abide by our pay scales in return for our bailing them out,” writes Harold Meyerson in a column Friday.
“After all, what’s the moral distinction between welfare recipients and the wizards of Wall Street, other than that the welfare recipients aren’t the ones responsible for tanking the global economy?”
Welfare reform that passed in the 1990s created the program called Temporary Assistance for Needy Families (TANF). The government intervenes intimately into the lives of TANF recipients, requiring drug testing, time spent doing government approved activities and near-constant documentation of continuing compliance. The intervention is justified by reference to the payments being made.
One House Democratic aide quipped that bankers should be required to jump through some of the same hoops that welfare recipients are, beyond a simple salary cap. He suggested making bankers fulfill a strict work requirement and submit a time sheet, signed by a supervisor — perhaps the Board of Directors — in 15-minute intervals, proving that they worked 40 hours each week. Only certain activities would count, as is the case with TANF recipients.
“That three hour jet ride to get to the meeting in Chicago doesn’t count. Reading the Wall Street Journal is also not a countable activity. If they fail to do this once, you cut them off of TARP funds. If they fudge the time sheet, you charge them with TARP fraud and make them pay back any government money they’ve received,” the aide joked. “I’m sensing a legislative opportunity.”
Sen. Sam Brownback (R-KS), though, said the underlying reasoning has merit. What applies to welfare recipients ought to also apply to corporate welfare recipients, he said.
“I think it does apply to that,” he said. “People are livid about these big bonuses and if the groups want to take government money it seems they should be able to have some limits on these bonuses.”
“If they don’t need it, don’t want it, fine. Don’t take it,” the Kansas Republican added.
Other Republicans disagreed. “It’s still government running business,” Inhofe said.
“It’s a leap, because the executive at the bank is a free agent who can leave the bank and go to work someplace else,” said Sen. Bob Bennett (R-UT) of the welfare comparison. “You run the risk of having a brain drain at the bank of their top talent.”
Bennett said, “Some of the things some of these bank executives have been doing demonstrates they have a tin ear. At the same time, I’m generally troubled by wage and price control, no matter how logical it may appear.”
The objection to the government intervention in salaries is rooted in the Republican belief that government is inherently ineffective. “If Congress can run a financial institution, it belies everything I’ve seen in this body. Government does not do a good job running private institutions,” said Sen. Kit Bond (R-MO).
Sen. Tom Coburn (R-OK) agreed: “If we do such a good job of running the federal government, what business do we have telling them how to run the banks?”
The GOP is also concerned that setting compensation limits could put the country on the road to serfdom. “This is just a symptom of what happens when the government intervenes and we start controlling all aspects of the economy. This is just the first piece,” said Sen. Jim DeMint (R-SC). “If you accept the fact that the government should be setting pay scales in America, then it’s hard not to go after these exorbitant salaries. But I think it’s a sad day in America when the government starts setting pay, no matter how outlandish they are.”
“What are we going to do next?” wondered Martinez. “Tell a company if they get TARP money where there offices should be? They should be renting maybe from an abandoned federal building?”
Minority Leader Mitch McConnell (R-KY) and and Sen. John McCain (R-AZ) may have had the savviest responses to the tricky political question. McConnell didn’t acknowledge that he’d been asked the query; he walked on to the Senate floor instead of answering. McCain declined to comment.
Opposition isn’t uniform. Beyond Brownback, other Republican senators spoken to for this article, including Sens. Coburn, Richard Lugar (R-IN) and Orrin Hatch (R-UT), expressed some support for a government effort to control the salaries of executives of banks that take bailout money.
At least one Republican has thought about the plan and come around to it. “In theory, I don’t like it. I just don’t like the government telling private industry how to run their businesses,” said Sen. John Thune (R-SD) when first asked about it.
About fifteen minutes later, Thune had changed his mind. “You know what? I think I’m for that,” he said of Obama’s plan. “I don’t disagree with what he’s doing.”
WASHINGTON, D.C. – U.S. Senator Jim Inhofe (R-Okla.) today went to the Senate Floor to express his deep anger over the AIG bonuses being given out after the company received $180 billion in taxpayer dollars in the bailouts and place the blame where it belongs: on the 74 Senators who voted in favor of passing the $700 billion bailout last October. The following are excerpts of his speech:
“Should we be mad at the executives who are involved in this and who ran a once-great company into the ground? Yes. But that’s not where the blame game ends. That’s not where the buck stops,” Senator Inhofe said. “I know that I will upset some of my colleagues when I remind them, and the American people, that much of the blame should be directed right here, to the members of this body, the US Senate, to the other side of the Capitol in the US House for voting for the original $700 billion bailout. Blame lies as well on the other end of Pennsylvania Avenue, to President Obama.
“Let there be no mistake: The policies which the members of the House, the Senate, and the current Administration ratified and voted for have brought us to this point. And let’s learn the lesson of this most recent abuse of taxpayer dollars and the public trust: we need a change of course in our approach to the financial crisis.
“I don’t know how someone at AIG giving out or receiving a bonus right now can look themselves in the mirror, but I and my colleagues in Congress can look you in the eye right now and say, if we don’t see action on this and action on it soon from the Administration, you can be sure that we will do all we can to right this wrong and get these bonuses back. But above all, we need the people to demand a change in course when it comes to the financial rescue approach we’ve been taking.”
Sen. Inhofe’s full remarks as prepared for delivery:
Mr. President, I join the rest of my colleagues who have been outraged to learn about the excessive bonuses for AIG executives while the company consumes $180 billion of taxpayer dollars at the federal trough.
Should we be mad at the executives who are involved in this and who ran a once-great company into the ground? Yes. But that’s not where the blame game ends. That’s not where the buck stops. I know that I will upset some of my colleagues when I remind them, and the American people, that much of the blame should be directed right here, to the members of this body, the US Senate, to the other side of the Capitol in the US House for voting for the original $700 billion bailout. Blame lies as well on the other end of Pennsylvania Avenue, to President Obama.
Let’s be clear on where the outrage should be targeted – it should be targeted at the 74 Senators, including then-Senator Obama, who voted in favor of handing over an unprecedented amount of money and power to an unelected bureaucrat last October. The AIG situation is clear evidence of what happens when you shovel money out the door with no strings attached and no transparency.
So 75% of the Senators in this chamber said to both Secretary Treasurers Hank Paulson and Tim Geithner, who was in on it back then too, when voting in favor of the massive bailout to, “take the $700 billion and do anything you want with it.” So how can those who voted for the $700 billion bailout explain that now?
Let there be no mistake: The policies which the members of the House, the Senate, and the current Administration ratified and voted for have brought us to this point. And let’s learn the lesson of this most recent abuse of taxpayer dollars and the public trust: we need a change of course in our approach to the financial crisis.
When it comes to AIG, outrage doesn’t even come close. I’ve said for a very long time, from the outset in fact, that the federal government needs an exit strategy for its entanglement into the financial system. The revelations that AIG is trying to give hundreds of millions in bonuses at the same time it’s the recipient of the biggest government bailout in US history shows why.
How can you give out bonuses when the US taxpayer has to rescues you from sudden failure? What are these bonuses for exactly? I understand bonuses to be a reward for a job well done. It’s pretty clear that when you get bailed out by taxpayers, you’re not doing a good job. What could possibly justify these bonuses?
I normally would not support having the government try and micromanage pay packages in any industry. But these are not normal times. AIG has received almost $180 billion–$180 billion—in US taxpayer bailouts. The US government owns 80% of the company. How the executives as AIG do not get the fact that these are not normal times is absolutely beyond me.
I’ve been saying for a long time that we need a change in course in our approach to the financial bailouts. President Obama’s Treasury Secretary came out over a month ago, February 11th, and said he had a plan for a change in course, but he didn’t actually have a plan. We haven’t heard from him since. Where is Tim Geithner? Where is the leadership on this? Where is the change in course? Where is the accountability?
I don’t know how someone at AIG giving out or receiving a bonus right now can look themselves in the mirror, but I and my colleagues in Congress can look you in the eye right now and say, if we don’t see action on this and action on it soon from the Administration, you can be sure that we will do all we can to right this wrong and get these bonuses back. But above all, we need the people to demand a change in course when it comes to the financial rescue approach we’ve been taking.
Finally, let me say again, let’s be clear on where the outrage should be targeted – it should be targeted right here in the chamber – the 75% in here who voted in favor of handing over an unprecedented amount of money and power to an unelected bureaucrat last October.
|Banking Committee Senators Request Subpoena of AIG Contracts|
March 18, 2009 – WASHINGTON, D.C. – U.S. Sens. David Vitter (R-Lousiana), Jim DeMint (R-South Carolina) and Jim Bunning (R-Kentucky) today requested that Banking Committee Chairman Chris Dodd and Ranking Member Richard Shelby formally subpoena the relevant AIG contracts as well as any other documents related to bonus and compensation materials.
“Since the very beginning of these federal bailouts, we have seen mishap after mishap at the taxpayer’s expense,” said Vitter. “This bonus fiasco is the most recent and is a direct result of a lack of transparency and accountability. The public has a right to understand how these bonuses came to be and what the Treasury knew about the contracts prior to the recent press reports since it is their tax dollars that paid for it.”
“Americans have every right to be angry after Washington politicians rushed to give billions of their taxes to AIG and promised them unprecedented taxpayer protections. Americans deserve to know who broke these promises and why. One thing is clear already: Americans are fed up with bailouts for failed businesses and don’t believe the rhetoric from Washington anymore,” said DeMint.
“I am deeply disturbed by the fact that the very same executives who were responsible for the risky behavior that led to the financial problems at AIG are still being rewarded with millions of dollars in bonuses paid for by the American taxpayer. These people don’t deserve bonuses. They deserve to be fired. I want to know exactly what Treasury Secretary Geithner, Fed Chairman Bernanke, and former Treasury Secretary Paulson knew about these contracts when the government decided to intervene and why they decided it was acceptable to reward bad behavior at the expense of the taxpayers. While this is an outrage, it is merely obscuring the larger problem that the money used to bailout AIG was really used to bailout European Banks and Goldman Sachs. This never would have happened if we hadn’t bailed them out in the first place,” said Bunning.
The rules of the U.S. Senate Banking Committee only require that the chair seek the agreement, approval, concurrence, or consent of the ranking member before issuing a subpoena, or the chair also may gain approval for a subpoena from a majority of the committee.
TEXT OF LETTER TO DODD