Business as Usual… Are You Surprised ? When Will You Wake Up ?

Business as Usual

Congress is still riding the AIG outrage express, but the drive to actually crack down on the beleaguered company is sputtering.

That first week, a House lawmaker redefined American International Group’s acronym as “Arrogance, Incompetence and Greed.” Over in the Senate, Sen. Chuck Grassley (R-Iowa) suggested company executives commit suicide to demonstrate their shame. And the subpoena threats flew across the Capitol.

But those are just words. Three weeks after the AIG storm broke, efforts to regulate bonus payments, compensation packages and just about anything else at the mega-insurer are foundering.

Asked Thursday about progress on his AIG bonus bill, Senate Finance Committee Chairman Max Baucus (D-Mont.) merely shook his head and said, “We’ll wait until after the recess.”

The Obama administration played a significant role in calming the AIG storm when the president signaled his opposition to a House bill that would tax AIG bonuses at 90 percent, telling “60 Minutes” that he would not “govern out of anger.” The latest House bill to retroactively crack down on almost all bailout company bonuses, passed Wednesday evening, has been met with silence on the Senate side.

The AIG scandal, however, reflects a common pattern on Capitol Hill.

Here’s how these brushfires usually unfold: A scandal breaks in the media, the public is outraged, congressional recriminations follow, wealthy men in suits testify under oath about their sins, pledges to reform are made, bills are introduced.

And then … everyone moves on to the next outrage.

This also happened in January, when news broke that Wall Street had paid out $18 billion worth of bonuses in 2008.

Obama slammed the bonuses as “shameful.” And Sens. Ron Wyden (D-Ore.) and Olympia Snowe (R-Maine) proposed an amendment to curb excessive payouts by bailout recipients, which was adopted unanimously by the Senate as part of the stimulus bill. The proposal was dropped in conference negotiations, a decision Wyden blames on Obama’s economic team.

“Some members are starting to ask how you’re going to explain if you’re on recess and another round of these excessive bonuses comes out [or] it happens in another three weeks,” said Wyden. “Each time it happens, it’s going to be harder and harder.”

Even a bipartisan Senate bill is having trouble gaining traction.

Last month, Baucus and Grassley introduced legislation that would impose a 70 percent tax hike on “excessive executive compensation,” but they got little support from their colleagues in the wake of Obama’s comments. Sen. Mark Warner (D-Va.) is also promising to introduce a bill but has produced no details yet.

On Thursday, the House Oversight and Government Reform Committee hauled in former AIG Chairman Maurice “Hank” Greenberg to testify about the company’s business practices and risk management systems.
Photo: John Shinkle
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“We are struggling to find the best balance for getting it back,” said Sen. Claire McCaskill (D-Mo.), who was one of the first to propose a bill limiting bonuses at companies taking government rescue funds. “We are trying to find the best way of recovering that money for taxpayers without us getting into the sticky mess of trying to run a company.”

Senate Majority Leader Harry Reid said he’s waiting to act on bonus legislation until later this month, after Congress returns from its two-week recess.

“As we’ve consistently made clear, legislation is a last resort,” Reid’s office said in a statement. “Our preference is for AIG to take action voluntarily, and they have started to do that. We will continue to study the situation and determine whether our intervention is necessary to protect the American taxpayers.”

While Wyden sounds frustrated by the current stalemate, he has not given up hope that his colleagues will act.

“What’s important is that senators recognize that while, apparently, a good portion of the AIG money is being paid back now under the hot light [of public scrutiny], as sure as the night follows the day, if you just let things go by the board, you can be staring at this again in two months,” he said.

Even in the House, where passions ran hottest, some of the outrage seems to have dissipated.

About half of House Republicans broke ranks two weeks ago to vote with Democrats in favor of the measure taxing bonuses at 90 percent. But on Wednesday, when a second bonus restriction bill came to the floor, it passed with a narrower, largely party-line vote.

House Democrats are trying to keep the issue alive by expanding the AIG investigation far beyond bonuses.

On Thursday, the House Oversight and Government Reform Committee hauled in former AIG Chairman Maurice “Hank” Greenberg to testify about the company’s business practices and risk management systems. The bonus issue barely came up, and lawmakers focused on the role that Greenberg, who was forced out as AIG chairman in 2005, played in the company’s near collapse.

Chairman Edolphus Towns (D-N.Y.) plans to hold several more hearings over the next few weeks and solicit testimony from AIG CEO Edward M. Liddy.

“AIG was at the center of the whirlwind as the financial services sector began to crumble,” Towns said in his opening testimony. “We believe it will serve as an excellent illustration of what went wrong and what we need to change and to correct.”