This week hasn´t been pretty for Sen. Chris Dodd. Our business isn´t to take sides, but it´s worth noting: It wasn´t too long ago that bankers and politicians were mostly relieved that his executive compensation provision did not apply retroactively.
As we recall it, lawmakers, along with the Obama administration, not six weeks ago faced an embarrassing conflict between "Main Street" outrage over high pay packages and an overarching opinion, shared by both Wall Street and many in Washington, that too-strict limits on executive pay would thwart policymakers´ attempts to entice bankers to take government funds. After much grousing from the industry, the final version of the stimulus bill emerged from Congress with executive compensation terms that elicited disdain from participants on all sides of the debate-the mark of a truly fair compromise.
This temperance seems to have been forgotten amid the finger-pointing over which leaders approved of the bonus payouts to American International Group executives. Dodd has now become a recognizable personage in conspiracy theories positing that either he or Treasury Secretary Timothy Geithner -- or both -- knew of the big bonuses and tried to ferry them past public scrutiny for the benefit of industry buddies.
These theories completely miss the reality of the financial crisis: that it is enormous, draining and constantly in flux. Before regulators began hinting that the uptick rule meant to temper short selling could be restored, and before the Federal Reserve unveiled bold plans to buy Treasury bonds along with more mortgage-backed securities, the stock market was speeding down a hole. Rumblings from the Treasury on possible details for its proposed public-private partnership on toxic asset purchases had yet to dissolve into sweet rain. Citigroup had just received another huge cash infusion and Bank of America´s prospects weren´t looking much better.
It´s certainly true, from the look of the AIG compensation contract, that someone should have realized a long while ago that its stipulations would be incendiary if publicized. Not tackling the issue at first blush was an oversight, to be sure. But to carry the criticism further is to stray from a focus on the most important components of debate and action on the financial crisis. Clawing back AIG employees´ bonuses won´t halt the recession, and skewering lawmakers over fleeting hot-button issues won´t forward Congress´ efforts to untangle the many threads of their responsibilities toward building a stronger, more secure banking system.