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AIG Bonus Outrage, Deficit Complicate Obama Agenda

March 20, 2009 at 6:30 PM EST
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With Washington still railing against more than $160 million of bonuses at insurance giant AIG, Mark Shields and Byron York consider the impact of the furor and the new estimates of the growing federal deficit on President Obama's agenda.
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JIM LEHRER: And to the analysis of Shields and York, syndicated columnist Mark Shields and Byron York, chief political correspondent for the Washington Examiner. David Brooks is away tonight.

Mark, you take those stories, those two segments we just had back to back, the “House of Cards,” at the very top, Bear Stearns, and those kids in Pomona, what have you got?

MARK SHIELDS, Syndicated Columnist: Well, what you’ve got, Jim, in the Pomona piece, in particular, and William Cohan’s book and explanation and insights, I think, are incredibly valuable, what we’ve got in Pomona is a reminder that unemployment rates don’t bleed. You know, statistics don’t cry.

This put a human face on what was done by these “House of Cards” people and the consequences that people in their lives, and it’s affecting families, it’s affecting children. Just a ripple effect is just enormous, and I just wish every one of them who played a major role in this, in the public or private, I mean, who didn’t regulate where they should have, who were doing things they shouldn’t have done, have put the economy and the financial system in this country at risk, would sit down, as the president did yesterday, with those children.

JIM LEHRER: Byron, do you have the feeling that that message that we heard from those kids is finally being heard by all these people who are — I’m not talking about, you know, necessarily just the people on Wall Street, but a lot of others on a lot of other streets are now finally getting the message here?

BYRON YORK, National Journal: Well, it is, because people are worried about their own futures. I think polling showed not — over the last several months, when the financial crisis first began, people were, of course, worried about their 401(k)s and their savings.

And at some point in January, when unemployment figures began to go up and up and up, they’re predominantly worried about losing their own jobs, losing their job, the story of losing a house, having to move in with a relative, take in some renters to try to make the rent, is a terrible possibility for people. And I think that everything we’ve seen shows that people who have jobs today are worried about losing them tomorrow.

JIM LEHRER: And just like we reported in the news summary, you know, just as you say, a figure, a piece of information, news story that over 115,000 postal workers’ jobs are going to go…

MARK SHIELDS: That’s right.

Impact of AIG scandal

Mark Shields
Syndicated columnist
It violates the fundamental value of fairness in this country. The rule is that, you know, if you work hard... you reap those benefits. This is sort of a fail-safe, risk-free capitalism. You lose; you screw up; and you get a bonus.

JIM LEHRER: I mean, and those are also people like the people from Pomona, et cetera, that all of us need to keep in mind. This was the week of AIG, too. What happened as a result of this week of AIG? Where are we because of all of this?

BYRON YORK: It has not been a good week, I think, for anybody involved. We find out at the beginning of the week that there are going to be these $165 million in bonuses to AIG employees, who may or may not be the ones who were responsible for the riskiest work that nearly brought the company down, that would have gone down had the federal government not intervened.

The Treasury Department starts -- and Congress start putting out conflicting stories. What did we know? When did we know it? Kind of pointing the fingers and covering their own backsides.

And then you have a situation in which Congress, the House of Representatives, really, I think, acts like kind of a panicked herd, and there's a stampede, and they pass this bill with very little thought to impose a 90 percent tax on these AIG employees who make more than $250,000, are getting bonuses.

And, you know, in my opinion, this is the reason the founding fathers created a Senate, to, you know, put the brakes on this thing and think about it for a little bit. But it's a week in which nobody has looked good.

JIM LEHRER: Do you agree there's nobody shining on this one?

MARK SHIELDS: No, I don't completely agree, by any means. I'd say, first of all, the reaction to the AIG bonuses was widespread, it was intense, and it was spontaneous, and it was almost continental.

I mean, I traveled this week, and everywhere I went -- I don't care if it was a waitress or a cab driver or just somebody you ran into -- the anger, the fury just bubbled up. It was there; it was palpable.

And, Jim, it's because it violates the fundamental value of fairness in this country. The rule is that, you know, if you work hard and you're a successful enterprise, then you benefit, you reap those benefits.

This is sort of a fail-safe, risk-free capitalism. You lose; you screw up; and you get a bonus.

I mean, by this standard, the Washington Nationals, which lost -- a team that lost more games than any team in baseball last year -- would be in the World Series. I mean, they'd be rewarded for this.

I mean, this is really just outrageous, and it offends people. And I think the anger was understandable. I think the administration didn't gauge it. They gave this sort of calibrated answer on the Sunday talk shows about these are contracts, and they'd forgotten a month ago, Jim, they made contracts with General Motors and Chrysler had with their workers.

But those were abrogated. If you wanted to get federal aid, you had -- those workers had to surrender wages and benefits, blue-collar workers. But, my goodness, gracious, these lords of the universe on Wall Street, we'd better be tender with them.

Some in Congress knew about bonuses

Byron York
The Washington Examiner
This is something that the Treasury Department asked the Senate to put into this bill, and they did it for policy reasons... But once it came out and turned into this big hot cause, they began to run from it.

JIM LEHRER: Well, let's take this one. Generally speaking, how did the administration handle this week of AIG, particularly the president?

BYRON YORK: Well, Mark is absolutely right about the anger out there, but this was a decision that the administration and Congress made. It wasn't an accident that this clause...

BYRON YORK: Well, of course not. This clause ended up in the stimulus bill, which was passed, and it specifically protected these bonuses, and...

JIM LEHRER: Ones that were already under contract.

BYRON YORK: Ones that were already under contract.

JIM LEHRER: ... federal rescue funds...

BYRON YORK: And they set a date. I think it was February 11th. If the contracts existed before then, they would be protected.

This is something that the Treasury Department asked the Senate to put into this bill, and they did it for policy reasons. Now, it may be a good reason; it may be a bad reason. But once it came out and turned into this big hot cause, they began to run from it. So I think all sense of logic here was lost.

JIM LEHRER: The question -- did you agree with that, that if -- that a panic -- this was a panic based not really on the facts. I mean, the facts were well known. It just had gotten -- it got known by the public...

MARK SHIELDS: The public. The public.

JIM LEHRER: ... in a way that went bad. But everybody who else was involved already knew about it.

MARK SHIELDS: I don't think they all knew about it.

JIM LEHRER: All right.

MARK SHIELDS: I think a few people did. I mean, Elijah Cummings, the congressman from Maryland, warned about it last November. He said that the bonuses these fellows have is they still have a job, that we shouldn't be paying them.

When the initial bailout of AIG was done, President Bush and Secretary Paulson insisted that there be no limits at all on any compensation. That was it, absolutely. That was a killer amendment, if there was any change in compensation. Compensation had to be left to the private sector.

And Byron's absolutely right. It was preserved on the 11th of February. Do I think it was uniformly known? No. But I think, once people became aware of it, people understood how wrong this was and how violative of, I think, values that people do live and believe in.

Republicans split on bonus tax

Mark Shields
Syndicated columnist
It is responding to a sense of public outrage. And I think, quite bluntly, Jim, it's totally legitimate to give voice to that... and to let these people know that shameless greed has its limits.

JIM LEHRER: What do you think, Byron, about the congressional reaction and -- well, the House so far has passed this 90 percent taxation thing. The Senate has not yet acted. Is that a responsible act by the Congress of the United States?

BYRON YORK: I think it's a scary act by the Congress.

JIM LEHRER: Scary?

BYRON YORK: Yes, I do, because it's dangerously close to a bill of attainder, which is specifically prohibited in the Constitution, which is Congress cannot pass a law directed toward a single person or a small group of people punishing them without any sort of due process.

The House has widened this to include other companies, and perhaps it can pass the bill of attainder test, but it certainly kind of smells like one. And it's after these deals were made.

Now, these bonuses are a bad idea. And you have these companies -- you know, Merrill Lynch paid out, what was it, $2.5 billion in bonuses, not $165 million, $2.5 billion, which they speeded up to December so they could make sure they got the money out the door before...

JIM LEHRER: Before the Bank of America thing.

BYRON YORK: Yes, exactly. So these are a terrible idea, but I'm not sure that this is the right way for a calm legislature to go about this.

MARK SHIELDS: Democracy's messy. It really is. And if I'd been in the Congress, I would have voted for it. I mean...

JIM LEHRER: You would have voted for it?

MARK SHIELDS: I would have voted for it. I mean, I'll be very blunt. I mean, it was rather remarkable to see 85 Republicans for whom voting for any tax increase...

BYRON YORK: They split down the middle.

MARK SHIELDS: They split right down the middle...

JIM LEHRER: The Republicans did.

MARK SHIELDS: The House Republicans, 87-85. I mean, to see Eric Cantor of Virginia, the Republican House whip, I mean, more conservative than anybody that you want to find in shoe leather, to stand up there and vote for a 90 percent -- it was a sight to behold. But I can understand that anger. And there has to be...

JIM LEHRER: But anger is one thing. Byron is saying, wait a minute, maybe that's not the way to legislate. That's your point, right?

BYRON YORK: Exactly.

MARK SHIELDS: Maybe it isn't. But, I mean, it is responding to a sense of public outrage. And I think, quite bluntly, Jim, it's totally legitimate to give voice to that...

JIM LEHRER: The outrage?

MARK SHIELDS: ... and to let these people know that shameless greed has its limits.

Toxic assets still a problem

Byron York
The Washington Examiner
The single most important thing the government should do right now is come up with a financial rescue plan that deals with the toxic assets that still threaten the entire economy.

JIM LEHRER: Now, is another impact of this going to be it will be a cold day in fill-in-the-blank before there's another stimulus package or another rescue package of any kind, because of the AIG heat?

BYRON YORK: Well, Republicans -- Mark is right about them opposing limits on executive compensation. Once that happened, though, Republicans have serious "I told you so" points right now, because every single one of in the House, all but three of them in the Senate, voted against this stimulus bill.

John Boehner has made a Web video of himself looking at a video of himself from that day in the floor of the House when he's holding up this enormous stimulus bill, and he says, "It's 1,100 pages, and not a single member has read it. And whatever happened to this idea that we should read stuff before we send it out?" And he drops it to the floor with a thud.

The Democrats pushed that bill through very, very fast before anybody had a chance to read what was in it. And they're saying, in the future, we can't do that again.

JIM LEHRER: So you don't think there's -- you do think there's going to be an impact here, more than just anger and a few...

BYRON YORK: Oh, absolutely. More skepticism of -- I mean, there's sort of a bailout fatigue, I think, in the public anyway, more cynicism about that, less faith in the treasury secretary, Timothy Geithner. Yes, these will have effects.

MARK SHIELDS: Here's the dilemma. And I know Byron is not seriously suggesting that any member of Congress reads every page of a 600-page bill.

JIM LEHRER: I'm sure he didn't mean that.

MARK SHIELDS: No, I mean, they never did. And I know John Boehner didn't, because I know John Boehner, and I like John Boehner, but John Boehner does not spend his time reading 1,100-page bills.

BYRON YORK: But this was a particularly rushed job.

MARK SHIELDS: This was a -- this was rush job. I understand that. But I think the reality for the administration is, nothing works until this credit thing is resolved.

Until you can figure out how this bank and get rid of these toxic assets, these bad mortgages. And to do that, it's probably going to take another $750 billion.

And I think AIG has poisoned the well...

JIM LEHRER: And not going to get that, do you think?

MARK SHIELDS: I think politically and in the country and in the Congress, there is not the will at this point, Jim, to say, "OK, let's pony up another $250 billion or $750 billion," absent guarantees and the president going -- the president passed the stimulus package, which did include a lot of good benefits for most districts, with three Republicans in the Senate voting for it and no Republicans in the House.

This is a lot tougher vote, and I think it's going to be a lot tougher sell.

BYRON YORK: Well, I think that it absolutely will be; there's no doubt about it. And, also, you have the problem is -- Mark is right. The single most important thing the government should do right now is come up with a financial rescue plan that deals with the toxic assets that still threaten the entire economy.

The president so far has not done that. Treasury Secretary Geithner has not come out with one. He came out and kind of announced a plan to have a plan.

The Treasury is not staffed at the moment. And the president has gone out and pushed health care, energy, and the environment, arguing that those are essential for a real, a true, long-lasting recovery. Meanwhile, this big, stinking problem is still there.

JIM LEHRER: Nothing has been resolved, that's what both of you are saying, until there's some sign that things are changing, things are getting better. Any more bailout rescue things are going to have a problem, AIG aside.

MARK SHIELDS: I think AIG makes it tougher, Jim.

JIM LEHRER: Makes it tougher.

MARK SHIELDS: I think so.

JIM LEHRER: All right. Thank you both very much.