[Congressional Record (Bound Edition), Volume 155 (2009), Part 6]
[Senate]
[Pages 7303-7305]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              AIG BONUSES

  Mr. SESSIONS. Mr. President, the bonuses for thousands of employees 
at AIG, that huge insurance company to which the Government, the 
taxpayers of the United States, have shoveled $170 billion into to keep 
that company afloat, makes me recall an old maxim. The Sessions maxim I 
call it--announced about 20 years ago when I was a Federal prosecutor 
attempting to faithfully enforce complex Federal regulations. I stated 
this:

       Oh, what a tangled web we create when first we start to 
     regulate.

  The more we proceed with policies whereby the Government owns 80 
percent of the stock of a private insurance company--or any company--
especially after we poured $170 billion in to buy that stock--the more 
we are inevitably compelled to direct how the company operates, to the 
point of deciding whom their executives should be. We basically picked 
Mr. Liddy, the chief executive--plus what the company's salary scale 
should be or what aircraft it can or cannot have or where and what kind 
of corporate retreat they might have or whether they can pay bonuses.
  The size of our investment--``investment'' is an absurd term when 
used to describe the reckless, gargantuan commitment of our citizens' 
money to AIG puts us, the American people into the insurance business. 
Not long ago, I had occasion to meet an official of a healthy insurance 
company. In jest, I asked him--it is not one of the biggest in the 
country, but it is a sizable company with broad reach. I asked him how 
he liked competing with a company supported by the deep pockets of the 
taxpayers. He replied it wasn't a joke--AIG was their top competitor in 
several economic or insurance markets. At bottom, we extract tax money 
from this businessman to keep afloat his reckless competitor. The size 
of this commitment cannot and should not be lost on us. The entire 
Alabama State budget--we are about one-fiftieth of the national 
population, a State well and frugally run by our Governor, Bob Riley--
including the State education budget for all the schools and all the 
teachers--thousands of schools--amounts to about $7 billion a year. So 
how big is the $170 billion we put into AIG? It is big.
  The entire Federal highway budget, for our interstate system and all 
the pork projects that get added to the highway bill, and the billions 
we send to the States for their highway programs, since they are on an 
80/20, 90/10 matched basis, with the majority Federal Government money, 
is $40 billion a year. So that $170 billion is a lot of money.
  But here we are, and similar to that unwise banker, we face the 
dilemma: Do we pour more good money in to revive this corpse in a 
desperate effort to recoup our improvident ``investment''?
  It is not an investment because no rational investor would ever have 
invested this kind of money in this company. The bullet was already in 
its heart. It was a dead duck. Only the Government would have put in 
the kind of money we put into it.
  So the facts are now becoming clear about some of the problems that 
go along with being in the private insurance business. The New York 
Times and the Washington Post have produced certain facts, with front-
page stories yesterday, which, having read them, caused me indigestion 
and provoked me to write these remarks for which I ask you to forgive 
me for delivering. But it makes me feel a bit better.
  What was the purpose of this $170 billion? The Washington Post said 
yesterday that it was to ``keep the company afloat.''
  Treasury Secretary Geithner has had a ``difficult'' conversation, 
according to the papers, with AIG's leader, Mr. Edward M. Liddy, about 
Mr. Liddy's plan to award $165 million in bonuses. Mr. Liddy says he 
finds that awarding the bonuses is ``distasteful.''
  I am glad to hear him say that. But then he says they are required 
under previous contracts entered into before he came to AIG or was put 
there by Secretary Paulson, President Bush's Secretary of the Treasury.
  As an aside, let me recall that had this matter been handled in the 
regular order such as other businesses in America get handled; that is, 
by appeal to the bankruptcy court for protection and reorganization 
under chapter 11, which doesn't shut down a company entirely but allows 
it to operate under bankruptcy protection, such as Delta Airlines, 
which is now performing very finely after saving itself through 
reorganization in bankruptcy, these bonus contracts would surely have 
been invalidated. For how could any Federal judge hold that executives 
of the ``same business unit that brought the company to the brink of 
collapse last year,'' said the New York Times, be given bonuses.
  This was a unit that did these reckless insurance derivatives that 
got them into this fix. So why should they be given a bonus?
  This has certainly been an embarrassment to, I will say not so much 
to the company which has by contract apparently awarded these bonuses, 
but to Secretary Geithner and President Obama, who I understand 
himself, his very self, today called for not awarding these bonuses. 
The President of the United States is now deciding the bonus policy of 
what was once at least a private company in the United States.
  At bottom, our tax money is being used to pay bonuses to reward those 
responsible for one of the most colossal and reckless errors in the 
history of world finance.

[[Page 7304]]

  I think this whole situation is one small but very revealing reason 
why I think that our Government--and I certainly include the Bush 
administration which started the process--should not have allowed 
itself to be drawn into, in fact, punching this tar baby, getting 
itself more and more deeply embedded in a situation that it has no real 
ability or capability to manage.
  You see, we now own about 80 percent of AIG. It is ours--yours and 
mine. Who then is to run AIG? Secretary Geithner? I like to call these 
high finance guys such as Mr. Geithner ``masters of the universe.'' He 
is now returning from Europe where he upbraided the Governments of 
France and Germany for not spending more money and for not invading 
deeper into the private sector and for not going into debt even more 
deeply to, as he would say, I guess, stimulate the economy. He thinks 
they ought to spend more and borrow more, and they are spending more 
and borrowing a lot. He thinks they should be spending more and 
borrowing more and they should be like us.
  I suspect running AIG must be a bit distracting even for our fine 
master of the universe because he has taken on the duty of advising not 
only the President and our Congress on how to fix the economy, but he 
is now advising our big government friends in Europe who are concerned 
about taking on more debt. The world is his parish, it seems. All the 
while, the proud people of the United States, inheritors of a great 
tradition of free enterprise and limited Government, watched this 
spectacle unfold in total mortification.
  The irony of these events, the historical dissonance of these acts of 
the United States pushing Europe further toward socialism, seems to be 
lost on our smiling and brilliant young Secretary.
  We are in a very difficult period financially, and there is only a 
limited number of actions prudent governments can take to fix it. But 
still in campaign mode, our Secretary declares it is the fault of the 
previous administration, and he promises that the new President will 
lead us out of it with bold action.
  Our Secretary of the Treasury is now calling Mr. Liddy at AIG and the 
paper said ``demands''--that he apparently violate contracts requiring 
these bonuses. I submit it is not so much because of the financial 
significance of these bonuses, but because it is an embarrassment 
politically. You see, the populace is getting a bit aroused about this, 
and the focus of their anger might cease to fall on the last 
administration and begin to fall on Secretary Geithner and his boss.
  The ``bonus'' dustup in one sense was theater, flim flummery, 
mountebankery, of course. Apparently in accordance with contracts and 
law, Mr. Liddy, while properly effecting his distaste for having to pay 
these bonuses, reluctantly paid them. I think they were paid yesterday. 
It caused much ado.
  Mr. Liddy, the Government--it is not fair to call him a stooge. He 
was actually placed in this position by the Government to take over 
this unfortunate, disastrous company. However, he could not resist one 
parting shot to his overlords, noting that he could not run ``the AIG 
businesses--which are now being operated principally on behalf of the 
American taxpayers--if employees believe their compensation is subject 
to continued and arbitrary adjustment by the U.S. Treasury.''
  He says right there he is operating this company on behalf of the 
American taxpayers, but he cannot do so if the Secretary of Treasury is 
going to tell him what kind of employment policy he should execute. 
That was in the paper yesterday. Apparently he wrote that letter 
Saturday.
  Oh, what a tangled web we create. Will Secretary Geithner now set 
policy on insurance premiums? We own the company. Why can't the 
Government cut everybody's premium? Maybe we could order the premiums 
to be lowered. We own 80 percent. That would be a nice stimulus, 
wouldn't it, lower everybody's premiums? That is a stimulus we have not 
tried yet.
  Probably not. He is too busy running the world and advising the 
French and the Germans on how to conduct their business and telling 
them they need to borrow more money.
  What is going to happen now that the President and Mr. Geithner have 
demanded that the bonuses be stopped? This is pretty interesting now. 
What is going to happen? The people at AIG said they have to award the 
bonuses or they will be sued. Are they going to sue Secretary Geithner 
and the President if the bonuses do not get awarded?
  I suggest it is plainly obvious that the folks who destroyed the 
financial soundness of AIG should not in any just world get a bonus. 
The only thing free they may deserve is a free lunch and a free room in 
the Bastille.
  One thing we know: Much of this money has passed through AIG to the 
benefit of other corporate interests. But one thing we don't know 
completely is who they are, although today's paper had some of them 
listed. The biggest one getting $12 billion plus, almost twice the 
total 1-year funding for the State of Alabama, was Goldman Sachs--
Secretary Paulson's company he left to join the Government and be 
Secretary of the Treasury. They were the biggest ``bailoutee'' of this 
whole mess. We are going to find out more about that. But it doesn't 
look good to me. I don't like this whole process.
  Things were decided in secret without any kind of hearing, so far as 
I can tell, without in-depth taking of testimony under oath, such as 
would happen in a bankruptcy court. Apparently people came in to 
Secretary Paulson's and later Secretary Geithner's office. They sat in 
and asked for $50 billion, $100 billion, $80 billion, and they would 
discuss it a little bit and would come out and say: We will give you 
$60 billion.
  How does this happen? I don't know. I think we have a right as 
Americans to be concerned--very concerned--about the recklessness on 
Wall Street that caused a major financial catastrophe for the country. 
And we need to be worried that our attempt in panic, I think, to fix it 
may cause more problems for our historical heritage of free enterprise. 
A lot of people have begun to think about it. Although when I talk with 
people in my home State, they think about it. They say: What are you 
guys doing? My 88-year-old great-aunt, whose eyes are failing and she 
cannot read now, but she tries to keep up on things, she put her hand 
on my arm a few weeks ago and said: Buddy--she calls me ``Buddy''--
ya'll don't know what you're doing up there, do you? She was so 
sympathetic. That is what most American people think and are probably 
right.
  I will say again, if your Government, our Government had acted 
properly, we would have allowed this company to go forward in a 
controlled, orderly process through reorganization under chapter 11, 
and we would not have this bonus embarrassment. Those folks would have 
been ordered to tell the truth in a well-equipped Federal court 
process, and there would have been no reason for the healthy parts of 
AIG to fail at all. They are being pulled down by the bad part. They 
could have then dealt with that toxic part of the company in a more 
responsible way, in a more public way, in a bankruptcy court before a 
Federal judge who took testimony under oath and could put people in 
jail who deserve to go to jail.
  I conclude with this. This spectacular spasm should be a vivid 
warning to the danger of arrogance by those would-be masters of the 
universe. You are not as smart as you think you are. Market forces 
ultimately control in the real world. Nothing comes from nothing. Debts 
must be paid.
  Secretaries Paulson and Geithner remind me of a man in an airplane 
off the gulf coast throwing out dry ice in an attempt to prevent a 
hurricane. Do you remember that? Or of Mr. Ludd in England taking a 
sledgehammer to the weaving looms of England to stop the Industrial 
Revolution. I have seen the force of real hurricanes. We are now seeing 
the force of a financial hurricane, and a lot of people are getting 
hurt.
  But there is good news, really there is. Hurricanes do pass. We will 
recover. The greatest danger, though, is that in this time of trouble, 
our Government,

[[Page 7305]]

in a burst of overreach, will permanently damage the great heritage of 
free enterprise, ordered liberty, and limited Government that has made 
this the freest, most productive economy in the history of the world. 
Why would we want to be lecturing France on how to conduct an economy 
by telling them they should be a bigger, more oppressive government 
than they already are?
  I will certainly meet my colleagues in a bipartisan effort to work to 
mitigate the economic and emotional pain we are now suffering. But if 
bipartisanship means acquiescing in the wildest of economic chimeras 
that we have recently followed, count me out. If it means changing the 
legal and economic order that, through ups and downs, has formed the 
moral basis of the American dream and served us so well, count me out.
  Oh, we are told by our leaders--and Mr. Geithner said this at the 
Budget Committee hearing when I asked him a few days ago--we would 
never want to do that. We are committed to the American heritage of 
economic order, he said. But one writer noted that at a time of rapid 
erosion of a nation's classical values, the leaders are most vociferous 
in proclaiming their adherence to them.
  Count me a skeptic. I am watching what is being done, not what is 
being said. For me and for those who love liberty, limited Government, 
and free enterprise, these actions that are occurring today are 
troubling and frightening indeed.
  I yield the floor, and I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BINGAMAN. Madam President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mrs. Hagan) Without objection, it is so 
ordered.
  Mr. BINGAMAN. What is the business before the Senate?

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