In it, but not of it. TPM DC

I just spoke with Rep. Alan Grayson (D-FL), a freshman on the House Financial Services Committee who's become a fast-rising star thanks to his tenacious advocacy for transparency in bailout lending by the Federal Reserve.

Grayson joined fellow Democrats as well as Republicans in blasting AIG for its refusal to give up hundreds of millions of dollars in bonus payments. He painted the government's choice as a stark one, using the metaphor of treating a wound versus amputating a limb.

"It's not clear to me at all that we're taking the correct approach by allowing AIG to continue to operate, regardless of who owns it," Grayson told me. "At this point, ownership is becoming an amorphous concern when comes to a company that borrows millions and millions without any prospect of paying it back. ... Do we continue to allow the bleeding or not?"

Converting AIG from a ward of the state in all but name to an outright arm of the government would be a politically controversial move, given the level of apprehension in Washington over calls to nationalize failing banks.

But Grayson views the dilemma facing lawmakers as a common-sense decision: AIG executives who made more than a million dollars while running the company into the ground should immediately be fired. "The people who caused the problem are not going to be able to solve it," he said.

Asked if the Obama administration understands the need for swift and meaningful action to reclaim AIG's bonus payments, Grayson's answer was an unequivocal yes. President Obama "didn't come out and talk about soybean price supports," the Florida congressman quipped, referencing the White House's remarks today on AIG.

Grayson's perspective echoes what I've heard from Democratic aides on the Hill, who continue to view Congress and the administration as on the same page in pushing for prompt pushback against AIG -- still, no one in the Obama camp has followed Congress' lead in calling for heads to roll at the company.

There is one question, however, on which the freshman Democrat was openly skeptical of the administration. Grayson pointed out that the White House budget included a $250 billion "placeholder" pot of money, the purpose of which is an open secret in the Capitol.

"We all know it's going to be doled out by the administration to companies like AIG," Grayson said, unless Congress moves to prevent it. Whether Democrats have the political will to deny another bailout request from the president remains to be seen.

Michael Steele has taken the GOP's global-warming denial to a new height: "We are cooling. We are not warming. The warming you see out there, the supposed warming, and I use my finger quotation marks here, is part of the cooling process."

That quote comes from Steele's little-noticed appearance as a guest-host on Bill Bennett's radio show the Friday before last, which was just dug up and posted by Sam Stein.

Steele also continued to make threats against pro-stimulus Republicans, as well. "Those first principles, with respect to how we as Republicans, as conservatives view the economy, view wealth creation, have to be adhered to, they have to be supported," he said. "And those who don't put their reelection in harms way."

This really does show how Steele is the gift that keeps on giving: Even when he's stopped doing media appearances, we get previous ones like this or the GQ interview popping up in the interim.

The Service Employees International Union (SEIU) and the Change to Win labor federation are wasting no time in seizing the political moment as anger flares over AIG's commitment to its own executives' bonus payments.

The unions, along with several other partners, are launching takebacktheeconomy.org and planning protests on Thursday at the regional offices of bailed-out banks in more than 100 cities. The goal of the day: pressuring Wall Street into substantively changing its bonus-happy culture.

But there is a bigger goal for the day, one that goes beyond expressing anger at corporate abuse of power. The labor movement sees an opportunity to link the Employee Free Choice Act (EFCA), the union organizing bill that is its No. 1 priority this year, to the growing tide of post-bailout populism.

Two of the banks to be closely targeted on Thursday are Citigroup and Bank of America, both of which have lobbied hard against EFCA while taking taxpayer money.

One labor official said that unions are "hoping this is going to be a real outlet, hoping we can seize this moment in time to advance EFCA" as voters connect the corporate influence that helped bring about the bailout with the influence that's keeping EFCA from achieving the necessary level of support in the Senate.

Late Update: After the jump, you can read the full letter that SEIU sent out today announcing the Thursday protests.

Read More →

Larry Smar, the communications director for Senator Bob Casey (D-PA), told TPM in an e-mail that Casey has not attempted to get GOP Senator Arlen Specter to switch parties, after Dem Governor Ed Rendell said in an interview that Casey, Joe Biden and himself have all tried to talk Specter into it:

The Governor may have been referring to the green jobs event in Philadelphia last month when the Vice President, the Governor and Senators Casey and Specter were on stage together and there was some public joking about Specter changing Parties. Senator Casey has had no private conversations with Senator Specter about switching Parties.


Biden's press office has replied that they are not commenting on his private conversations with Specter, and Specter's office pointed RNN-TV, which did the Rendell interview, to previous comments in which Specter said he was prepared to run for re-election in 2010 as a Republican.

President Obama addressed the growing controversy over AIG's retention bonuses this afternoon. Excerpts from his remarks can be found here, but it's notable that he did not signal much of a change in his administration's approach.

Obama said he has asked Treasury Secretary Tim Geithner to use the "leverage" of the taxpayers' investment in AIG to press for the return of the retention bonuses -- which is exactly what Congress has been pressing for all weekend.

But using "every legal avenue" to recoup the money may not be enough, as AIG's lawyers have already advised the company that it's legally obligated to pay out the bonuses. And Obama said that Geithner would continue "to resolve this matter with the new CEO, Edward Liddy," who has already made it pretty clear that he wants the bonuses paid. (And at least one senior Democrat, Rep. Elijah Cummings [MD], is already calling for Liddy's resignation.)

The Hill reports that the Coleman campaign is talking down that rumor that Norm might become RNC chairman, saying that nobody has asked him about it and that he supports Steele:

"Senator Coleman believes that Chairman Steele is doing an exceptional job, is a strong voice and leader for the party," Coleman spokesman Tom Erickson said. "And, he looks forward to working with him to build the party when he returns to the United States Senate."


It makes complete sense for Norm to put the kibosh on this one. After all, the Politico post said this would happen "after he loses his recount fight and big donors see Michael Steele's March numbers."

And absolutely nobody in Norm Coleman's position would want to legitimize a story like that.

The Democrats are keeping quiet on the rumor published this morning in the Politico, that Norm Coleman might take over as RNC chairman after a potential Michael Steele departure.

So far, the national party and the Franken campaign are not commenting. Even the Minnesota DFL Party -- the folks who have brought us some of the best anti-Coleman attack lines out there -- is declining to comment. As one anonymous Democratic official said: "When the Republicans are forming a circular firing squad, the last thing we're going to do is step into the middle."

Meanwhile, a Washington GOP source expressed some skepticism to TPM about the whole idea of putting Norm in: "If the argument against Steele is that he's not conservative enough, then no, it's absurd."

House Democratic leaders send out a daily list of talking points on the biggest stories in the capital, and today's memo mentions the burgeoning scandal over AIG's retention bonuses:

As a result of contracts entered into before government rescue funds were approved last year -- so before limits were in place -- AIG has paid out $165 million in bonuses to top executives.

AIG has committed to Treasury that they will look how to repay taxpayers for the retention payments.

A House Financial Services subcommittee hearing on Wednesday morning will look into problems at AIG.


That's all true ... but the reality of the situation goes deeper than this week's $165 million. It's not even clear that AIG's 2009 retention bonuses would be affected by the executive compensation limits that were added to the economic stimulus law.

Those limits don't apply to pay arrangements negotiated before last month, and it appears that AIG has already inked agreements on some of its 2009 incentive payments.

When reporting on AIG's bonus payments and the resulting political backlash, it's easy to get bogged down in numbers without seeing the full picture. So here are some points to keep in mind.

AIG CEO Edward Liddy has already agreed to take a $1 salary for 2008 and 2009, and he isn't in line for any of the $1 billion in total retention bonuses that are at issue this week -- $450 million of which is slated to go to the company's disgraced Financial Products unit.

But it's important to distinguish retention bonuses from plain ol' bonuses, because senior AIG executives certainly do. In a December 5 letter to Rep. Elijah Cummings (D-MD), Liddy said that five of the company's seven most senior executives (called the Leadership Group) "will not receive annual bonuses for 2008 or salary increases through 2009."

Yet Cummings himself had first called Liddy's attention to a November filing from AIG that said senior executives had agreed to delay payments of their retention bonuses, the money that's being paid out this week in defiance of the Obama administration. Among the AIG execs receiving retention payments are two members of the same Leadership Group that had pledged to forgo its bonuses: Chief Financial Officer David Herzog and Executive Vice President of Retirement Services Jay Wintrob.

So to be clear, these executives are getting paid this month ... while continuing to tout their willingness to give up other bonus payments. There's no stronger argument for seeking to reclaim the money without negotiating with Liddy, as the Obama administration had been previously attempting to do.

Late Update: To shed some more light on the retention bonuses being paid out this week, they're different from the ordinary annual bonuses that most companies give. The retention payments were negotiated early last year, according to AIG, with the goal of retaining key executives and preventing them from decamping to competing firms.

The focus on retention bonuses explains some of the weirdly out-of-touch rhetoric in Liddy's Saturday letter to Tim Geithner, where he argues that keeping the "best and the brightest" talent at AIG would be impossible if the government actually used its power to limit executive compensation.

Vice President Biden's office is not giving any details on a report that he has tried to recruit Senator Arlen Specter (R-PA) to switch parties.

As we posted on earlier today, Governor Ed Rendell (D-PA) said in an interview that he has tried to get Arlen Specter to switch parties -- and according to Rendell, so has Biden.

Biden deputy press secretary AnnMarie Tomasini tells TPM: "Our office does not comment on the Vice President's private conversations with Senator Specter."

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