Connecting the Dots in the AIG Bonus Fiasco

This is a rush transcript from "On the Record ," March 18, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Senator Chris Dodd, Chairman of the Senate Banking Committee, is confusing us. Is he responsible for the amendment that opened the gate for the giant AIG bonuses or not?

Yesterday, Senator Dodd says he did not know how modifications to an amendment got into the stimulus bill allowing for these giant bonuses.

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SEN. CHRIS DODD, (D) CHAIRMAN, SENATE BANKING COMMITTEE: When the language left the Senate, the language I wrote on executive compensation, had no dates in it like this at all. I mean this language would have, we think, this kid of bad situation.

When the language which went to the conference and came back, it was different language. Now, there were whole sections struck from the bill. Mine wasn't struck, although I think there were those who wanted to on executive compensation.

I can't point a finger at someone who is responsible for authoring the language that put those dates in. I can tell you this much--when my language left the Senate, it did not include it. When it came back, it did.

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VAN SUSTEREN: But today he told us something different, that treasury came to him and pushed for the change.

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VAN SUSTEREN: All right, senator, you are getting a lot of heat over this February 11 in the stimulus bill. What happens?

DODD: First of all, the debate this evening is why we didn't write any language in the stimulus bill that would protect against excessive compensation, golden parachutes, and bonuses? The Dodd amendment, which I wrote, wrote all of that into the Senate passed version of the stimulus bill.

It passed unanimously, although there were many critics of it. In fact, the last month and a half had a lot of critics who thought I went too far.

It is ironic that this evening and today those who thought I went too far now are arguing we didn't go far enough.

When the bill was completed and there was a conference between the House and Senate.

VAN SUSTEREN: Meaning voted OK, a vote passed by the Senate but then go to the conference to reconcile with the House.

DODD: Right. And so then the administration, which they admit, they had problems with my amendment. They thought it went too far. And they came and said "We have a couple of modifications we'd like to make to the amendment."

VAN SUSTEREN: Stop. Who is the administration?

DODD: The Treasury Department.

VAN SUSTEREN: Who?

DODD: There was staff coming over. We meet with the on staff and we go back and forth.

VAN SUSTEREN: Did the Treasury of Secretary Geithner tell you --

DODD: It is a public record that they had concerns about this. And their argument was the following at the time, and that was that these contracts, they would create a flood of lawsuits if they tried to undo the contracts. That was the argument given.

It wasn't negotiated myself. I would have preferred my amendment as adopted passed, stay in the bill.

But, frankly, the implicit suggestion was if there weren't modifications, the entire section that I wrote could be dropped.

So you are in that position. Do you make some modifications or not. I would like to do it. Certainly my preference would be to have been left it alone. Or do you take some in order to preserve 90 percent of what you achieved already.

And that's the position we were in. That date is modified.

And I would urge people to look at the language, because it says very explicitly that even though there is a date here, the treasury department has a right to reach back and go after those bonuses if, in fact, they are inconsistent with the TARP legislation or contrary to the public interest.

This evening, the administration is using that clause in effect to argue that they have a right to go back after those bonuses.

So, in a sense, while the date has significance, the modification to it actually allows them to do exactly what I intended in the first place.

VAN SUSTEREN: One last question, how is Secretary Geithner doing?

DODD: He has probably been asked to come into this job in the most difficult times since The Great Depression. So he has a flood of issues on his plate. They're complex, they're difficult, and I think we all recognize that what we're going through here.

So the president has confidence in him. I think we need to give him a chance to get this right. Certainly this kind of a moment doesn't help.

Again, the reason I wrote this language, why I have always felt strongly about executive compensation going back into this fall, because if you lose the public confidence on these issues, the ability to make the tough decisions to do what we need to do to get our economy back on its feet again, it is going to be severely crippled.

And that is exactly what's happened. People have lost confidence, and they do so when they see events like this. So that is the reason I wrote the legislation a month and a half ago in the stimulus bill, and it's why I did it last September on the emergency economic stabilization bill as well.

You've got to deal with this. Warrants and accountability standards and counterparties and par value, those words do not mean a lot to the average citizen. But undeserved compensation at tax payer expense does. The people are curious about it, and they have a right to be.

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GRETA VAN SUSTEREN, FOX NEWS HOST: Earlier, we spoke with Senator Chuck Grassley of Iowa.

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VAN SUSTEREN: Senator, you are on the committee, or you were a part of the conference, supposedly, to reconcile the Senate version of the stimulus bill and the House version, right?

SEN. CHUCK GRASSLEY, (R) IOWA: Yes.

VAN SUSTEREN: Did you actually go to this conference, because it is actually quite important because of this provision which enables AIG to give $165 million out in bonuses. Did you go to that?

GRASSLEY: We did not know even know where the conference was meeting or when it was meeting until the last night before the report came out. About 8:00 at night they called a committee meeting in a room just off of the Senate floor. There were a lot of people there.

And we sat down with six Democrats and four Republicans. That was the first time we were involved. We were told that that was going to be the last session of the meeting.

And the first thing the chairman of the conference committee said to everybody, rapped the gavel and said something like his-"We will listen to speeches, but I am not going to take any motions or any amendments."

In other words, that was their way of saying that six Democrats had met someplace over a course of several hours, worked out the differences between the House and Senate, and said, "This is it," and that was all we had to say.

I made a statement about the process. I made a statement about some of the substance as best I knew it, and we did not know much about it at that time because it was 12 hours later we got it on our desk and we only had 12 hours to read it, and, obviously, we didn't get it all read in 12 hours.

VAN SUSTEREN: Prior to you sitting down on that night when you came in for what you described as a photo-op, someone has put into this bill this provision so that AIG could get these $165 million worth of bonuses, right?

GRASSLEY: Yes.

VAN SUSTEREN: Who did that?

GRASSLEY: It was said today who did it, and Senator Dodd today, I heard on television--I haven't talked to him personally--that he said he did it at the behest of Treasury Department and the White House. So all I have to go on is what he said on television.

VAN SUSTEREN: What do you think about that provision?

GRASSLEY: When you look at it, it reminds me of some mistake that we made back in October when we put a lid on compensation for corporate executives that were involved in getting this federal money, $500,000 golden parachute.

We assumed that-at least I would assume that compensation includes bonuses, but it wasn't expressed out as bonuses. So you can see in the writing of the restrictions on the use of TARP money and on executive compensation that the original mistake goes back to October when we did not include every possible thing that could be included.

VAN SUSTEREN: Now, I heard the comment, the suicide comment. Do you want a do over on that one, or do you stand by that one?

GRASSLEY: I don't anticipate that anybody would take me seriously that Chuck Grassley is going to advise people at AIG or any other corporation to commit suicide.

But I can tell you this--I have been making that statement back since October 1, 2008. I made it on the Senate floor in October and recently repeated it. And just now did it upset people.

I stand by that for the simple reason that I think that we do not have a corporate responsibility in America that we ought to have, because I have not heard one, not one, of the CEO's apologize for driving their corporation into the ground.

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