For a while, the disappearance of an executive bonus restriction from last month's economic stimulus looked like sleight of hand worthy of a Las Vegas stage. No one could explain how the provision faded into thin air.
But on Wednesday, Sen. Chris Dodd, D-Conn., acknowledged that his staff agreed to dilute the executive pay provision that would have applied retroactively to recipients of federal aid. He said on MSNBC's "Hardball" that it was done at the request of administration officials.
"It's been reported widely the administration had problems with my language on the compensation," he told Chris Matthews, the show's anchor.
Dodd said the changes were made during the House-Senate conference on the $787 billion stimulus bill, which occurred in mid-February. At the time, Treasury officials were worried about lawsuits if the provision applied to existing compensation contracts.
"The alternative, frankly, was that we might lose the entire amendment," he said.
The provision was the subject of new attention this week because — had it survived — it would have prevented AIG from granting $165 million in bonuses to employees of its financial products division.
Public outcry
The head of embattled American International Group Inc., which has received $182 billion in bailout money, testified Wednesday before angry lawmakers.
Edward Liddy, who was brought in last year by the government to run AIG, told a House subcommittee that the company was contractually obligated to pay the bonuses but that some of the recipients have begun returning all or part of them.
On Thursday, the House of Representatives was scheduled to vote on a bill that would levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money.
"We figured that the local and state governments would take care of the other 10 percent," said Rep. Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee.
Rangel said the bill would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money.
'Completely unaware'
Dodd said Wednesday he was not aware of any AIG bonuses at the time the bonus restrictions were changed in the stimulus legislation.
"Let me be clear: I was completely unaware of these AIG bonuses until I learned of them last week," he said.
An administration official said Treasury made Dodd's staff aware of the potential for litigation but did not demand that the provision be removed from the final stimulus bill. The official spoke on the condition of anonymity to the Associated Press because he was not authorized to discuss the matter in public.
The stimulus does include a provision that allows Treasury to examine past compensation payments to determine if they were "contrary to the public interest." Treasury Secretary Timothy Geithner said he was using that provision to determine whether the government could somehow recoup the AIG bonuses.
Dodd said he doesn't know the names of the Treasury staffers who sought modifications to the provision.
Over the years, Dodd has been the top recipient of campaign contributions from AIG employees. During 2007-2008, when he ran for president, he received nearly $104,000 from AIG employees and their families, according to the Center for Responsive Politics, a nonpartisan group that monitors money in politics.
Dodd said Wednesday that he would return any campaign donations that are linked to bailout money.
"I don't want those contributions," he said, according to the Connecticut Post.
Dodd, who was first elected in 1980, is facing a tough re-election contest next year. A recent Quinnipiac University poll showed the senator trailing former Republican Congressman Rob Simmons in a hypothetical Senate race.
