Dem Congressman on AIG: ‘One of Those Times We Have to Amputate’

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.

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