Capitol Hill Bribery ($9 million)

American International Group (AIG), the world’s largest insurance company, purchased favor on Capitol Hill with over $9 million in campaign contributions to federal candidates during the past 20 years. Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking Committee, received more than $280,000, making AIG his fourth largest contributor. So from the start his perspective for doing his Senate job was tainted. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, got $91,000, making AIG his largest contributor. So much for the other Senate contribution to oversight. So the two senators charged with protecting the public interest were co-opted by the very firm they were supposed to be watching.

Pricey Vacation ($440 thousand)

Then AIG got into trouble, and in mid-September last year the government gave them $85 billion of OUR MONEY. (More was added later, for a total so far of $173.3 billion.) Unchastened by their dismal performance, the AIG employees promptly blew $440,000 of the taxpayer funds on a fancy corporate retreat at the St. Regis Monarch Beach resort in Dana Point, California.

These funds were spent on Sept. 22, a week after the Federal Reserve extended an $85 billion emergency loan to AIG to keep it from going bankrupt due to insurance liabilities. According to the receipt from the St. Regis, the eight-day company retreat was a lavish one — $139,000 was spent on hotel rooms, while even more money — $147,301 — was spent on banquets. Another $23,380 was spent on undisclosed spa treatments and another $6,939 was spent on golf. A full $9,980 was spent on room service and food and cocktails at the hotel lounge.

Unsanctioned Payments To “Trading Partners” ($120 billion)

Next, AIG distributed over $120 billion of the money intended to improve the economic climate in the United States to other private businesses, banks, and municipalities, both in the US and abroad. European firms Société Générale SA and Deutsche Bank each received nearly $12 billion.

After calls for more transparency, AIG disclosed Sunday that roughly two-thirds of the $173.3 billion in federal aid it received has been paid out to trading partners such as banks and municipalities in the U.S. and abroad…. There are political risks to the disclosures, notably the fact that taxpayer dollars are essentially passing through AIG to make whole private businesses and foreign banks.

Bonuses ($450 million), Incentives ($121.5 million), and Retention Payments ($619 million)

Then, as if the political bribery, personal indulgence, and unsanctioned largesse to other agencies were not egregious enough, AIG payed huge bonuses and retention stipends to the very employees who did such a lousy job.

On Sunday, new criticism emerged about $450 million in bonuses paid to employees of AIG’s Financial Products unit, which made a series of bets on credit default swap contracts that drove $40.5 billion in losses last year….

The payments at AIG’s financial-products unit are in addition to $121.5 million in incentive bonuses for 2008 that AIG will start making this month to about 6,400 of its roughly 116,000 employees. Separately, AIG is also making $619 million in retention payments to 4,200 employees.

Together, the three programs could result in roughly $1.2 billion in retention and bonus payments to AIG employees. At least some individual employees are receiving millions of dollars — at the financial-products unit, for instance, seven employees will get more than $3 million for 2008, according to an AIG document.

Assessing Guilt, Fault, and Blame

Over this past weekend, enough details leaked out in the media to fuel growing public outrage:

AIG Faces Growing Wrath Over Payouts

Troubled insurer American International Group Inc., now 80% owned by U.S. taxpayers, spent the weekend deflecting mounting criticism of how government funds have been funneled to various banks and used to pay employee bonuses at the business unit that almost sank the company.

The inept government agencies that engendered this debacle immediately began scrambling to appear on the side of the just.

SPIN METER: Cue the Washington outrage

For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn’t until the money was flowing and news was trickling out to the public that official Washington rose up in anger… Why the sudden furor, just weeks after Barack Obama’s team paid out $30 billion in additional aid to the company?

Speaking with CNN on Tuesday, Senator Christopher Dodd disclaimed knowledge of the bonus loophole in the AIG bailout agreement. But the original draft had contained a clause that prevented the bonus payout, and Dodd had been involved in rewriting it to permit bonuses, a fact which gave the lie to his claims of innocence. When confronted with this discrepancy by CNN reporters on Wednesday, Dodd tried to gloss over his misrepresentation:

In an apparent change of his position, U.S. Sen. Christopher Dodd said Wednesday that he was aware of changes in legislation for a loophole that allowed highly controversial bonuses for AIG, the embattled insurance company that has received federal bailout money.

In a live interview on CNN, Dodd said, “I agreed reluctantly. I was changing the amendment because others were insistent.”

Previously, Dodd had said he was not a member of the conference committee that crafted the final version of the highly complicated bill. But he had come under strong fire from Republicans and others as the person who was involved in what CNN anchor Wolf Blitzer had called a “mysterious loophole” in the legislation.

When Blitzer asked Dodd what had changed in his understanding between Tuesday and Wednesday, Dodd replied, “Going back and reviewing it. … I apologize if we had some confusion.”

More interesting than Dodd’s getting caught in his own two-version story is the fact that, in his discomfiture, he blurted out the choice morsel that the “administration” had directed that the bonuses be allowed. So now reporters are frantically “working their sources” to determine whether Dodd meant socialist Obama or tax cheat Geithner.

Likely Casualties

Obama appeared guilty. Instead of facing reporters in Washington, he quickly made a trip to California to appear at a couple of town-hall meetings. There he could be photographed against a backqround of cheering liberals, doing what he does best, spouting campaign rhetoric.

Before leaving, Obama uttered that famous phrase that presidents use just before throwing someone under the bus to cover their own sins:

In response to a reporter’s question, Obama said that he had “complete confidence” in Treasury Secretary Timothy Geithner….

Senator Dodd faces the worst fallout. There are more voters in Connecticut registered Independent than either Democrat or Republican:

The total number of registered voters in Connecticut is 2,097,635. The largest group of registered voters in Connecticut is unaffiliated, accounting for 883,274 voters. There are 779,784 registered Democrats and 427,020 registered Republicans.

And they are increasing unhappy with Dodd:

Dodd Under Fire For Legislation Behind AIG Bonuses

A mini-firestorm exploded Wednesday over U.S. Sen. Christopher Dodd’s role in legislation regarding the huge bonuses at AIG, the highly controversial insurance giant that is receiving about $170 billion in federal bailout money….

Republicans see their opportunity:

As Blame Game Deepens, AIG Outrage Could Give GOP Electoral Opening

After two straight electoral drubbings, Republicans finally might have found a path to the soul of the voters: AIG.

The GOP tried to harness taxpayer outrage last month when Congress was debating a stimulus package five times bigger than the first one. But the package passed, and Democrats’ poll numbers only increased.

Voter outrage could be more consolidated this time, following revelations that bailed-out American International Group paid $165 million in bonuses to employees at a rogue financial unit.

Christopher Dodd’s Earlier Sins

Of course, this comes on the heels of the Countrywide loan scandal, in which Dodd refinanced two mortgages with Countrywide under much-lower-than-average rates at the same time he was pushing favorable legislation for them in the Senate.

There’s more. Real estate partners William Kessinger and Edward R. Downe Jr. are friends of Chris Dodd. In 1993 Downe (guilty as sin) was convicted of insider trading and ordered to pay the SEC $11 million. When Dodd found an Irish cottage that he wanted but could not afford in 1994, Kessinger shared the purchase with Dodd, making two-thirds of the down payment. In repayment, Dodd obtained a presidential pardon for Downe from Bill Clinton. Rental covered the mortgage payment, and years later, when the property had appreciated substantially, Dodd refinanced with an Irish bank and payed back Kessinger two-thirds of a much earlier lower appraisal, making a tidy profit. From the Hartford Courant — Dodd’s ‘Cottage’: A Cozy Purchase:

In 2001, Dodd did the favor of a lifetime for his pal, Downe. The veteran senator circumvented the normal Department of Justice vetting process and got Downe a full pardon from President Bill Clinton on his last day in office. Dodd initiated the pardon request and included in his two-page letter to Clinton the tidbit that he speaks to Downe nearly every day.

Related:

Washington Times — What did they know and when about AIG?

Wall Street Journal — Dodd’s Safe Perch Is Shaken by Bailout

Hot Air — Dodd: You know, now I remember adding that bonus language

CNN Politics — Dodd: Administration pushed for language protecting bonuses