At the top of Wednesday’s CBS Early Show, co-host Maggie Rodriguez interviewed Democratic Congressman Barney Frank about upcoming hearings on bonuses AIG gave to top executives after receiving government bailout money: "And who in the government didn't vet this company well enough before it gave the money to address the issue of bonuses...So who's responsible here in government? You said the Federal Reserve did this." Frank replied: "In September, Mr. Bernanke, as the head of the Federal Reserve, came to us and said 'we think we have a terrible problem here, we are going to provide $85 billion to AIG. That's -- that was the decision it wasn't anything that Congress had any say over."
Rodriguez did not challenge Frank’s assertion that the Democratic Congress was not involved, failing to ask the Massachusetts Congressman about the role his Senate colleague, Connecticut Democrat Chris Dodd, played in allowing AIG executives to keep their bonus money. On Tuesday, Fox Business reported: "While the Senate was constructing the $787 billion stimulus 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 exempts the very AIG bonuses Dodd and others are now seeking to tax."
Earlier in the segment, regarding the bailout Frank declared: "There was no congressional involvement. The Bush administration was supportive, but it was a Federal Reserve decision. In what we have done since, we have put strict rules in. But this was a -- we were not asked by the Federal Reserve. We weren't consulted."
Here is the full transcript of the Barney Frank interview:
MAGGIE RODRIGUEZ: Joining us now, also from Washington, Congressman Barney Frank, Chairman of the House Finance Committee. Good morning to you, Representative Frank.
BARNEY FRANK: Good morning.
RODRIGUEZ: In this letter that we have from Secretary Geithner to Speaker Pelosi, he says that he plans to recoup the $165 million in bonuses by taking it out of the $30 billion that we're giving AIG. Is that an adequate solution, in your view? Even though it allows these executives to keep their bonuses.
FRANK: No, and we're not stopping at that, they're going to be multiple attacks here. But one thing I want to note is -- and we want to reassure people, we have prevented this thing -- this sort of thing from happening again. In the money that is now being given out, this is money that was given out by the Federal Reserve last September, that wasn't part of the congressional vote that made money available, and it had no conditions. We have since then gotten tougher on conditions to the point where a number of banks that are getting the money under the new program say they don't want anymore and want to give it back because of the conditions, we'll take it. In this case, though, we are going to pursue them. There will be tax questions. I do not give up on the legal question. Look, Mr. Liddy said -- you alluded to this in the open, that he had to pay these and he wanted to retain people. Well, when he gave that second reason that leads me to believe that he may have had some discretion there. And the notion that you want to retain these people, some of them have already left. Frankly, I think we're better off with them having left. These are the people who made the mistakes, I don't want to retain them. And another thing, in addition to everything that we can do-
RODRIGUEZ: Well, but they got to keep their bonuses when they left. $33.6 million for 52 people who left the company.
FRANK: Right, as I said, that's -- that obviously undercuts this argument that they were for retention. We are going to be pursuing that. Look, the federal government is a major owner of this company by the actions that the Federal Reserve and others took to put up the money. We're the owners, we're not just the regulators. I believe we have a right to say, as the people who in effect own the company, 'no, you didn't earn a bonus.' Part of this though, as we go to get the money back from these individuals, it's a signal that we have to do what I've been trying to do, reform compensation in general. And I want to look at who made the decision to put into place -- they say we're contractually obligated? Well, who signed those contracts on behalf of the company?
FRANK: Who was so lax as to give-
RODRIGUEZ: And who in the government-
FRANK: As to give people-
RODRIGUEZ: And who in the government didn't vet this company well enough before it gave the money to address the issue of bonuses before-
FRANK: That's right. The Federal Reserve -- the Federal Reserve, in September, came to the Congress and said under a statute that dated from 1932, they were going to provide the $85 billion. There was no congressional involvement. The Bush administration was supportive, but it was a Federal Reserve decision. In what we have done since, we have put strict rules in. But this was a -- we were not asked by the Federal Reserve. We weren't consulted. We were told they were to put the money in. But it is part of a need for us to look at compensation structures in general. You have too much of this going on, in the financial community in particular, where people get bonuses if things go well and pay no penalty if they go badly. So they take too much risk. In this case, though-
RODRIGUEZ: So who's responsible here in government? You said the Federal Reserve did this.
FRANK: Yes, they just-
RODRIGUEZ: Is it Ben Bernanke, is it Hank Paulson before him?
FRANK: Well, no, Hank Paulson has never been the head of the Federal Reserve. Hank Paulson was Secretary of the Treasury. The Federal Reserve-
RODRIGUEZ: Oh, pardon me.
FRANK: The Federal Reserve-
RODRIGUEZ: Is it Ben Bernanke you're blaming?
FRANK: I'm sorry, Can I finish the sentence.
RODRIGUEZ: Go ahead, Congressman.
FRANK: It's not the -- you know, there's some [inaudible] here. A statute was passed in 1932, during the Depression under Herbert Hoover, which gave the Federal Reserve the power to lend money to any entity in America it wanted to if it felt it was necessary. That hasn't been used for many years. In September, Mr. Bernanke, as the head of the Federal Reserve, came to us and said 'we think we have a terrible problem here, we are going to provide $85 billion to AIG. That's -- that was the decision it wasn't anything that Congress had any say over. Now, it is my hope that before too much further, we will amend that statute. That's far too much power for them to have. But, at the time that told us it was a fait accompli.
RODRIGUEZ: Alright, Congressman Barney Frank, thank you very much for your time.