The Treasury Department demanded that Sen. Chris Dodd insert exemptions into the stimulus bill that allowed bailout recipients to receive bonuses, the Connecticut Democrat said on Wednesday.
According to Dodd, officials at Treasury expressed concern that if the government were to prohibit payouts, it risked being sued by companies like AIG, which had contracts stipulating that bonuses were to be paid.
At the urging of Treasury officials, Dodd modified a clause he had previously inserted into the stimulus that prohibited bonuses from being issued by bailed-out companies. An exemption was added to allow bonuses that applied to in-place contracts.
"The alternative was, in my view, losing the entire section on executive excessive compensation," he said. "Given the choice ... I agreed to a modification in the legislation, reluctantly. I wasn't negotiating with myself. I wasn't changing my own amendment. I was changing the amendment because others were insisting on it."
"I would have preferred that we kept my language, as it left the Senate unanimously," Dodd added. "In fact there were objections when I wrote the language even before it left the Senate. ... The administration expressed reservations with the amendment. They came to us and asked for modifications in the amendment. The alternative was, of course, losing the amendment entirely, which was a possibility. I didn't want to see that happen. I suspect we would be having a conversation tonight why we didn't include some language in here to deal with bonuses, golden parachutes and the like. ... I don't believe anyone had any idea, I certainly didn't, that a month and a half later from February we would be talking about AIG and the bonuses they are receiving for their retentions, these $165 million. So that was never a part of the consideration."
The disclosure should put to rest one aspect of the debate over how a company like AIG, which has received $170 billion in taxpayer funds, was allowed to dole out $165 million in bonus payments. Still unresolved is who in conference removed the amendment introduced by Sens. Wyden and Snowe that would have taxed bonuses exceeding $100,000 at 35 percent.
More detail in CNN's write up here.