Sunlight Foundation

The Revolving Door Spins in CEO Pay Protector

In the back-and-forth regarding who inserted the retroactive bonus immunity provision into the stimulus bill, we were repeatedly treated to on-air dodgeball acrobatics as both Sen. Chris Dodd and Treasury Secretary refused to name the Treasury staffers who could have pressed for this provision. While Geithner has owned up to his role and his support for the bonus immunity provision--on the grounds that a legal challenge could invalidate the entire stimulus bill--it would be worth our time to take a look at one member of Geithner's staff: his chief of staff. Mark Patterson is a former lobbyist for Goldman Sachs who has lobbied for pretty much every position that the administration is now openly opposing.

David Corn, in Mother Jones, dives into this revolving door drama:

On Wednesday afternoon, as President Barack Obama was leaving the White House for a town hall meeting in California, he spoke for 15 minutes to reporters about the AIG controversy. Responding to the rising rage over the $165 million or so in bonuses paid to executives at the bailed-out insurance firm, Obama noted that he was quickly developing policies to prevent future AIG-like catastrophes. And he slammed Wall Street's culture of "excess greed, excess compensation, excess risk taking." To demonstrate that he's committed to battling such greed, the president cited his work in the Senate to rein in executive compensation. Noting that he and Rep. Barney Frank (D-Mass.) had each introduced legislation on this front in 2007, Obama declared that "there were some people who attacked us, saying government has no business doing that."

One of Obama's opponents at that time was Mark Patterson, a lobbyist then for Goldman Sachs, the investment banking firm, which opposed the Frank-Obama initiative. Yet Patterson is now chief of staff to Treasury Secretary Timothy Geithner, the embattled point man in the Obama administration's endeavor to undo the notorious AIG bonuses. That is, a Washington influence-peddler who worked against Obama's effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general.

Corn notes at the end of his post that, according to Treasury spokesmen, Patterson has recused himself from discussion regarding Goldman Sachs and issues he was previously paid to lobby. This still creates a serious conflict for Geithner, as Treasury is being partly managed by a former Goldman lobbyist. Geithner is also placed in a tough position considering that his chief of staff is limited in the areas in which he can work (supposedly).

For those who ask, didn't Obama plan on not allowing the influence of lobbyists into his administration, here's a handy chart showing the 30 individuals in his administration who were registered as lobbyists at some point during the past five years. Now not all of these persons are objectionable for their lobbying (lobbying on public interest issues is rather different than private interest), but it clearly flies in the face of a lot of remarks we heard during the campaign trail. National Journal's Julie Kosterlitz has a good article on this today as well.

Looking at the Dodd-Geithner-AIG-Stimulus secret provision quadrangle, the real problem may be who the decision makers listen to. If their top advisors are former Goldman Sachs lobbyists previously hired to lobby against tame executive compensation bills, then we can begin to assume where their positions come from.

Read the Bill: Tap the Brakes Already

Congress is like the Beltway. Sometimes it's impassible gridlock; so slow that nothing seems to move at all. Other times it moves so fast you barely knew you were on it. Right now, we're going the too-fast-to-pay-attention speed.

With outrage boiling over about millions of dollars worth of retroactive bonuses awarded to AIG executives, the House voted today 328 to 93 to get most of the cash back by taxing the recipients for 90 percent of what they received. (Here's the text of the bill.) Maybe this is a good way around the argument that the government must pay the bonuses because they're obligated contractually.

But why such a rush? The bill, introduced by Rep. Charlie Rangel (D-NY), yesterday, was available less than a day before lawmakers voted on it. Shouldn't Congress--and the public--get more time to read the bill?  After all, it was because Congress was in a hurry before that it got itself into such a mess in the first place.

Unfortunately, just like the Beltway, it keeps going round-and-round-and-round. To end this cycle, go to ReadTheBill.org and sign the Read the Bill petition calling for all bills to be placed online for 72 hours prior to consideration.

Read the Bill: Stimulus Bill and Bonus Loopholes

Last night Sen. Chris Dodd admitted on CNN that he was responsible, under administration pressure, for language in the final version of the American Recovery and Reinvestment Act that explicitly permitted the types of retroactive bonuses that A.I.G. is under fire for doling out. The tale of this obscure amendment shows how important it is that Congress provide time for the public to Read the Bill—remember, the 1,000+ page stimulus bill was available to the public for only 13 hours before Congress began debating it, most of that time during the wee hours of the night. If the legislation had been available longer, perhaps this provision would have shriveled in the sunlight.

On February 4, 2009, the Senate approved, by voice vote, an amendment proposed by Sen. Dodd to restrict executive compensation for firms receiving TARP funds. Dodd's amendment wasn't the most far reaching executive compensation amendment offered during debate, but it did seek to restrict excessive compensation retroactively--the issue raised by the A.I.G. bonuses-- something fiercely opposed by the officials at the Treasury Department and in the Obama Administration. President Obama had earlier released his own set of executive compensation restrictions which did not include retroactivity or the "clawback" provisions in Dodd's amendment.

One week later and the bill was in conference committee with leaders of the House and Senate, in talks with Obama administration officials, hashing out details for the final bill draft. The administration, including top economic officials Tim Geithner and Larry Summers, remained opposed to the executive compensations restrictions and sought to alter, or eliminate, them. When the final conference report was released on February 13, Dodd's amendment was altered significantly, including the insertion of a provision provided retroactive protection to all bonuses agreed to prior to February 11, 2009. Contemporary news accounts state that the administration was lobbying against the provision and that they won numerous concessions. The controversial provision was in direct contradiction to Dodd's original amendment and ultimately provided the justification for approving the ballyhooed A.I.G. bonuses.

On March 17, Dodd refused to acknowledge any part in inserting the retroactive bonus immunity provision. One day later, while dodging questions about who asked him to change the amendment, he admitted that, under pressure, he agreed to changes to the amendment. The text is as follows:

BLITZER: What I hear you saying is that, you personally, you did this in order -- at the request of officials at the Treasury Department, Timothy Geithner, among others.

DODD: Well, I didn't say who it was. But just say this, I wouldn't have modified my own amendment at my own insistence. I mean, I spent a long time to having people try to be -- change it. And obviously they came. And the alternative was losing the amendment. And I didn't think we should do that at all.

BLITZER: Who asked you at the Treasury Department to do it?

DODD: Well, they were people, obviously, coming and negotiating with the staffs back and forth. And I don't know their names specifically, it was at a staff level, people were talking about it.

BLITZER: So it -- but it wasn't just your members of your own staff at the Senate Banking Committee who did this, you personally knew about it at the time, is that right?

DODD: No, I didn't know the exact details. I knew they were coming with modifications to it, and whether or not we'd accept some.

Later on March 18, the Politico reported that a White House official acknowledged that, "Treasury told Congressional aides that trying to place limits on contracts already signed would create legal problems and could lead to lawsuits against the government."

There are so many things wrong with this situation it is hard to even start. First, Dodd apparently is saying that he didn't even know what the changes were to his amendment. Could there be any better case for requiring more time for lawmakers to read the bill? If he did know what the changes were, or even still if he didn't, it is the legislative branch's responsibility to write the laws. Responsibility falls on Congress for agreeing to the insertion of the retroactive bonus immunity even though the administration was leaning on them, and they should own up. Second, the closed conference committee system is a fraud and a threat to decent legislation. Technically, conference committee reports are supposed to be made publicly available for 48 hours before consideration, but that rule is rarely enforced. In 2006, the Democratic Party ran on making conference committees transparent and requiring 24 hours of public availability before consideration for all reports. That doesn't appear to be happening, and we're seeing the results.

To further show that conference committees cause undue, secret distortion to bills, we can take another example that is not the Dodd amendment, as it wasn't the only amendment changed in the conference committee. Another executive compensation amendment, sponsored by Sen. Ron Wyden and Sen. Olympia Snowe, was completely stripped from the bill in conference committee. The Wyden-Snowe amendment went further than Dodd's amendment in requiring "bailout recipients to cap their bonuses at $100,000. Any amount paid above that would have been taxed at 35 percent." Upon seeing the conference report, Wyden saw that his amendment, which was previously agreed to by the whole Senate, was stripped from the bill. No one consulted him, as they consulted Dodd. The fate of the Wyden-Snowe amendment also shows that the administration was the one seeking to protect executive compensation. Wyden told the Huffington Post, "I pulled out all the stops ... If the White House economic team had made it clear that this was important, this provision would never have been removed. I don't believe the president has been well-served on the bonus issue by his economic team."

As Wyden says, "This lack of transparency -- and the lack of accountability that results -- is one of the most significant threats to our democracy." The first thing we can do is make sure that all lawmakers, staff, and citizens have at least 72 hours to read and review all versions of legislation. To stop these loopholes and last minute deletions, we need to mandate more sunlight. To help make that happen, join the Read the Bill campaign.