Michael Webster
March 20, 2009
Dodd and Geithner should resign
By Michael Webster

WASHINGTON Senate Banking committee Chairman Christopher Dodd and Treasury secretary Timothy Geithner should resign according to some members of Congress and many members of the public. Senator Dodd first dined any knowledge that the executive-compensation restriction bill he authored which limited executive bonuses at AIG was removed by him or his people.

While the Senate was constructing the $787 billion stimulus bill last month, Dodd added an executive-compensation restriction to the bill. The provision, now called "the Dodd Amendment" by the Obama Administration provides an "exception for contractually obligated bonuses agreed on before Feb. 11, 2009" which restricted the 170 million in AIG bonuses.

Senator Dodd however just day before yesterday told the news media that he was not responsible for adding the last minute bonus loophole into the stimulus package. Dodd's original amendment did not include that exemption, and the Connecticut Senator denied inserting the provision.

Than Senator Dodd yesterday reversed himself by admitting to the news media that he was responsible for adding the amendment that permitted AIG and other companies that received bailout funds to pay bonuses.

Dodd acknowledged that he had "reluctantly" agreed to amend legislative language designed to limit executive compensation for companies receiving federal bailout money a change that ultimately permitted insurer AIG to pay millions in bonuses. Sen. Dodd now claims Treasury forced him to add language to the stimulus bill.

In addition to that Sen. Dodd was AIG's largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org . AIG's largest offices ( troubled derivatives branch) is based in Connecticut Dodd's home state. Many of the bonuses in question were awarded to executives at that branch.

AIG, an ailing insurance giant, has received more than $170 billion in federal assistance. Taxpayers now own nearly 80 percent controlling interest of AIG, but apparently have no say in the management or any control over the company as other share holders do across the nation. According to at least one legislator no one seems to know why that is.

Chairman Dodd said it was the Obama administration. Evidently meaning the Treasury Department and apparently Treasury Secretary Timothy F. Geithner who insisted and pushed for changes to the executive compensation restrictions that allowed AIG to issue millions in bonuses that have set off a public outcry.

The change to Dodd's amendment allowed AIG to hand out the bonuses and sparked a blame game between Dodd and Treasury Secretary Timothy Geithner.

Dodd's original amendment did not include that exemption, and the Connecticut Senator had denied inserting the provision.

"I can't point a finger at someone who was responsible for putting those dates in," Dodd told the media. "I can tell you this much, when my language left the senate, it did not include it. When it came back, it did."

"Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made," Dodd Spokesperson Kate Szostak told reporters.

The provision excluding those bonus payments made it into the final version of the bill, and is now law.

Treasury Secretary Geithner believed a major player and perhaps master minded the forcing of the removal of the last minute language changes in the bill. According to news reports Geithner failed to pay his own taxes and was repeatedly advised in writing by the International Monetary Fund that he would be responsible for any Social Security and Medicare taxes he owed on income he earned at the IMF between 2001 and 2004.

Mr. Geithner who was the president of the Federal Reserve Bank of New York which headquarters the financial industry has all year been at the center of the worsening economic crisis.

Mr. Geithner, 47, for weeks has been the subject of controversy with many wondering if he is the right man for the job. The all powerful Treasury secretary, has been put in charge of hundreds of billion of dollars of tax payers money for financial bailout programs.

Mr. Geithner, worked closely with his boss Treasury Secretary Henry M. Paulson Jr. and Mr. Bernanke at the Federal Reserve Bank helping to design and develop the Trillion plus economic rescue for banks and other financial institutions, an effort that was to reassure financial markets and bring back the economy and contain the credit crisis. Many Americans are outraged that President Obama picked Geithner a Bush administration financial insider and obviously pro Wall Street, and who would likely continue the Bush same type bailouts with little if any consideration for main street the general public Who of been lift holding the bag and having to cover the outrages creed of Wall street with there tax money.

Mr. Geithner as Treasury Secretary is over the Internal Revenue Service and is now in a position to say "do as I say not as I pay."

Mr. Geithner according to government documents didn't make any Social Security or Medicare tax payments on his income during the years he worked for the International Monetary Fund, part of the world Bank. He also employed an illegal immigrant housekeeper who lacked work papers. After the IRS audited him in 2006 and discovered the payroll-tax errors, Mr. Geithner corrected them for 2003 and 2004. But only after Mr. Obama picked him for Treasury secretary last fall did Mr. Geithner pay the Social Security and Medicare tax he owed for 2001 and 2002.

Sen. Christopher Dodd, D-Conn., said an amendment to the economic stimulus legislation that he authored was not intended to protect the troubled insurer, and he denied knowing about the controversial bonus program until last week.

"I did not want to make changes to my original Senate-passed amendment but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG," Dodd said in a statement released by his office.

AIG's payment of $165 million in bonuses has set off a firestorm on Capitol Hill and around the country. AIG Chairman and CEO Edward Liddy was grilled by lawmakers for hours on Wednesday over the payments, and the executive said the company would ask bonus recipients to give back at least half the funds.

Increasing attention is being paid to what and when policymakers knew about the payments. Liddy was repeatedly asked during a House subcommittee hearing whether the Federal Reserve and now Treasury Secretary Timothy Geithner were aware of the bonus program last year.

An executive at mortgage giant Countrywide Financial overrode the company's loan-writing policies to give a discount to Dodd, the powerful chairman of the Senate banking committee, according to an internal Countrywide document turned over to congressional investigators.

Dodd, who refinanced two mortgages with Countrywide in 2003, has said that he did not know that he had been placed in a special group of customers known as "Friends of Angelo" a reference to Countrywide CEO Angelo Mozilo or that he might have received preferential loan terms.

By contrast, Thursday's report by Republican members of the House Committee on Oversight and Government Reform describes a freewheeling program in which Countrywide loan officers gleefully boasted to other VIPs that Mozilo had personally authorized discounted rates and fees.

The report also concludes that Dodd and another senator, Kent Conrad, D-N.D., "appear to have violated" Senate ethics rules related to accepting gifts and loans not generally available to the public.

Bryan DeAngelis, Dodd's press secretary, disputed that conclusion.

"There is no new information from today's report. As the senator said in February, when he made all the documents public related to the refinancings of his 2003 mortgage loans, the Dodds acted properly in their mortgage refinancing negotiations," DeAngelis said. "They did not seek or expect any special rates or terms on their loans and they never received any. Furthermore, as both the materials he provided and an independent report showed, the rates and terms they did negotiate were widely available in the market when they refinanced."

Although the 63-page congressional report includes little new information on Dodd's deals, its release Thursday is more unpleasant news for the Democratic senator, who has been buffeted for months by politically damaging revelations.

He has also faced questions about past real estate deals in Washington, D.C., and Ireland.

But Dodd's political troubles began with the Countrywide deal, and assertions that one of the nation's top banking overseers had received favors from a key player in the subprime mortgage meltdown.

An internal "Loan Policy Analysis" of Dodd's mortgages shows that Countrywide's underwriting rules called for an interest rate of 4.875 percent on both loans, with fees equal to three-eighths of a point on one loan, and a quarter-point on the other. A point is equal to 1 percent of the borrowed amount, and for both mortgages, those up-front fees would have totaled about $2,500.

But the computerized record includes a second column showing what Dodd and his wife, Jackie Clegg, were actually charged. In that column, the points had been eliminated.

According to investigators, Countrywide's computer system required a manual override to implement loan terms more favorable than the company's standard underwriting policy. In Dodd's computer files, in a column labeled "Reason For Override," is the designation: "CMD Approved" which investigators say is shorthand for approval by a Countrywide managing director. Similar overrides are noted in loan documents for many other VIPs, investigators said.

Last month, Dodd allowed reporters to review more than 100 pages of mortgage documents for his homes in East Haddam and Washington, D.C., but did not permit them to make copies. A spokesman for Dodd said that the Loan Policy Analysis was among the records reporters were permitted to review. But none apparently recognized its potential significance.

Dodd also announced last month that he would refinance the loans with another lender.

In a government investigation report recently released concludes that officials at Countrywide gave special loan deals to thousands of VIPs from Washington politicians to Hollywood celebrities as part of an aggressive campaign to curry favor and extend the company's influence.

From U.S. senators to a mayor in Montana and former TV sidekick Ed McMahon, Countrywide gave breaks to the well-connected and the well-known, often coolly discussing in e-mail exchanges whether a customer's political juice justified the discount.

In an internal e-mail, a Countrywide managing director hesitates to cut a break for the mayor of Billings, Mont. "I'm usually in favor of settling on the side of the borrower with political influence," the official wrote, before concluding that the money at stake "has the potential of being a greater number than the Mayor of Billings Montana influence."

But a higher-up, noting the mayor's leadership role with the U.S. Conference of Mayors, approved the discount.

It was an easier call when loan officers learned that an applicant was the brother-in-law of an aide to a senior member of the House Financial Services Committee.

"Put this one in a 'moderate VIP' status," a Countrywide executive instructed in an e-mail. "The Hill staffer is very important to us."

In addition to politicians and government officials, other prominent Countrywide clients given special deals, according to the report, included actors Roy Scheider, Stanley Tucci and Uma Thurman; a deputy in the Malibu, Calif., sheriff's department; and Margaret Warner, a correspondent for "The NewsHour with Jim Lehrer."

In a new statement today from Sen. Dodd he says "I'm the one who has led the fight against excessive executive compensation, often over the objections of many. I did not want to make any changes to my original Senate-passed amendment but I did so at the request of Administration officials, who gave us no indication that this was in any way related to AIG. Let me be clear I was completely unaware of these AIG bonuses until I learned of them last week.

"Reports that I changed my position on this issue are simply untrue. I answered a question by CNN last night regarding whether or not a specific date was aimed at protecting AIG. When I saw that my comments had been misconstrued, I felt it was important to set the record straight that this had nothing to do with AIG.

"Fortunately, we wrote this amendment in a way that allows the Treasury Department to go back and review these bonus contracts and seek to recover the money for taxpayers. Again, I have led the fight to curb excessive executive compensation, and will continue to do so."

© Michael Webster

 

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Michael Webster

Michael Webster's Syndicated Investigative Reports are read worldwide, in 100 or more U.S. outlets and in at least 136 countries and territories. He publishes articles in association with global news agencies and media information services with more than 350 news affiliates in 136 countries... (more)

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