There's a lot of anger going around about the millions of dollars of bonuses given to AIG executives. Most of that anger is misplaced.
Here's the situation: AIG signed the contracts with these bonuses long before it got into trouble and got effectively nationalized. The contracts could have been renegotiated, just as the auto workers' contracts were, but that would have required renegotiation to be among the terms of the AIG bailout as it was for the auto makers. In this case, however, renegotiation wasn't part of the AIG bailout package put together by Tim Geithner as a Federal Reserve executive, and it wasn't part of the subsequent bailout packages put together by Tim Geithner as Treasury Secretary. The bonuses could also have been blocked by a provision in the $787 billion stimulus bill, but Senator Chris Dodd inserted a provision literally in the dark of night in the conference committee session that specifically protected all such bonuses agreed to before a specific date (I think it was February 11 this year). After the news exploded, Dodd spent a lot of time denying he had anything to do with that provision. Now he admits it really was his doing.
Senate Banking committee Chairman Christopher Dodd told CNN’s Dana Bash and Wolf Blitzer Wednesday that he was responsible for adding the bonus loophole into the stimulus package that permitted AIG and other companies that received bailout funds to pay bonuses.He now says he put that language into the bill at the request of the Treasury Department. That would be Treasury Secretary Tim Geithner, acting for the administration of President Barack Obama who also denied knowing about these bonuses before having to admit he really did know about them since last fall, at least.
On Tuesday, Dodd denied to CNN that he had anything to do with the adding of that provision.
What's the Congressional reaction to the public's outrage? The loudest voices are those of Senator Chris Dodd and Representative Barney Frank, arguably the two individuals most responsible for the mess we are in. They're saying that, if the executives don't return the bonuses they were legally given, they (Dodd, Frank, and the Congress) will pass a law to take it from them. The problems with that include that such a bill would be an ex post facto (after the fact, retroactive) law aimed at particular individuals. As Charles Krauthammer notes, such laws are banned by "a few hundred years of common law". They are also (a) blatantly unconstitutional in large measure because such bills and laws (b) were a large part of why the American colonies revolted against Britain just under 235 years ago.
Beyond the illegalities, and deserving of greater anger, is the blatant dishonesty and hypocrisy being heaped on the heads of the public by these "public servants". They have known about these bonuses, and took actions to protect them. And now they're pretending to be outraged in an attempt to distract us from their own culpability. It's all a Kabuki theater fraud. You'd think this government was being run by a bunch of crooked Chicago politicians.