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Edward M. Liddy, chairman and CEO of American International Group Inc., has become the reluctant defender of princely employee bonuses that members of Congress find indefensible. Video by AP

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Ben Pershing
Washington Post Congressional Blogger
Wednesday, March 18, 2009; 11:00 AM

Don't want to miss out on the latest in politics? Start each day with The Post Politics Hour. Join in each weekday morning at 11 a.m. as a member of The Washington Post's team of White House and congressional reporters answers questions about the latest in buzz in Washington and The Post's coverage of political news.

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Ben Pershing, washingtonpost.com congressional blogger, was online Wednesday, March 18, at 11 a.m. ET to discuss the latest news from Washington, including Congress considering a new tax on AIG bonuses, the president's budget proposal, the continuing economic crisis and more.

A transcript follows.

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Archive: Post Politics Hour discussion transcripts

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Ben Pershing: Morning, everyone. Sorry for the late start. Are you all watching the AIG hearing as we chat? Let's give an award to whichever lawmaker appears to be the most outraged today. And feel free to ask me about subjects other than AIG. There are, in fact, other things going on in the world of politics. Let's begin.

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Herndon, Va.: Can you give some more perspective on "budget reconciliation"? Are Republicans right to call foul, or was this done by Republicans also? Did Republican majorities give up and say "there is nothing else we can do" when they couldn't get to 60 votes in the Senate?

Ben Pershing: Good question. The answer is -- yes and no. As Lori Montgomery reported in her budget story this morning, Republicans did use reconciliation to move President Bush's tax cuts and for a handful of other issues. But it would be a bit of a stretch for Democrats to use the process to move legislation as sweeping as health care reform or a pollution cap and trade system, especially since those are only partially related to taxes. The real question for Democrats and President Obama, particularly on health care, is whether they want to move a bill this important with only 51 votes. You'd think they'd want at least some bipartisan buy-in.

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washingtonpost.com: President's Budget Strategy Under Fire (Post, March 18)

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Talk About "Wouldn't Wanna Be Ya": My understanding is that Liddy was appointed by the government. Was he appointed by congress? Can they "un-appoint" him?

Ben Pershing: Liddy was named to the job by President Bush, and I am fairly sure he can't be removed by Congress. If Obama wanted to pressure him to step down I'm sure he could do so, though.

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NYC: Isn't it disingenuous to report that Liddy receives only a dollar a year in salary? Is he not also receiving compensation in the form of equity and (ahem) bonuses?

Wouldn't this be a good opportunity for congressmen to get him to promise under oath that he will return to the company (i.e., the taxpayers who own 80 percent of it) any compensation to himself in excess of, say, $250,000?

Ben Pershing: Liddy is getting stock grants in addition to his $1 per year salary. I don't know how much stock he's actually gotten. It's not as though AIG's stock is super-valuable right now, though it is up this morning.

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Los Angeles, Calif.: Why do you think there was hard-hitting insistence on revising or breaking union contracts (particularly regarding health-care costs and other benefits) as a condition for the auto industry bailouts but no similar insistence on revising or breaking broker contracts as a condition for Wall Street bailouts? Are Wall Street broker contracts sacrosanct, are executives who make risky decisions that go against their companies the new heroes or do Wall Street folks simply make larger contributions to politicians than the rest of us?

Ben Pershing: This question has come up before. One difference is that the changes in labor contracts at the auto companies was the result of negotiations between the unions and management. The companies did not just say, "Never mind, we're not going to pay you," which seems to be what many people wish AIG management had done. The auto contracts weren't "broken." It's possible that AIG could have renegotiated its contracts too, but then the employees might have gone to court and tied the whole thing up in knots.

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I was at Berkeley in the '60s, again: Hey, Ben: GO BEARS!!!

Ben Pershing: I am totally with you. Sorry, Maryland fans -- The Golden Bears are going to steamroll the Terps tomorrow.

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Germantown, Md.: Is there 'any' chance at all the Senate will finally allow majority rule again? As in, 51 votes wins? I have to say, this 60 vote fake filibuster rule is wearing thin. Bring back the nuclear option!

Ben Pershing: No, I think there is very little chance of that. Remember, the Senate is supposed to be the "cooling saucer" in our democracy, the more deliberative body that doesn't speed things through the way the House does. What's funny about this argument is how quickly people switch sides on it. Remember, it was Republicans who advocated the nuclear option -- banning filibusters on judicial nominees -- when they ran the Senate, and Democrats who cried foul. Now Democrats are complaining about the rules and Republicans say they're sacred. So maybe they're actually just right the way they are.

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Corning, Ark.: Michael, thanks for the chat. Will Sen. Grassley have a samurai sword available for the AIG boss today?

Ben Pershing: I'm subbing in for Michael, and can only hope to meet his high standard. As for your question, I think we can agree that Grassley gets the award so far for "most irresponsible comment" about AIG. I think there's a good reason the company hasn't released the names of the people who got these bonuses. They probably should stay private, just for safety's sake.

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Re Terps and Bears: Whatever helps you sleep at night...

Ben Pershing: The Terps will have plenty of time to sleep after tomorrow.

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Philadelphia, Pa.: Reputable newspapers in Europe (Le Monde in Paris, Le Soir in Brussels...) have been reporting all morning that Geithner communicated last night to Pelosi his intent to "liquidate" AIG (For those who read French: Le Tresor americain veut "liquider" l'assureur AIG (LeMonde, March 18)) What am I missing? I don't think I'm misunderstanding the French verb "liquider" because comments have been showing up on French forums saying, hey, why isn't this being reported in the U.S.

Any clue what's going on here?

Ben Pershing: I'm not sure what you're talking about. I have not seen or heard any reports that Geithner is going to "liquidate" the company, and if that was true I would wonder why only the French press has unearthed the story. Maybe they have great, Francophile sources in Pelosi's office. Je ne sais pas.

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Anaheim, Calif.: Why is Obama going to a town hall in Orange County? It's nice that he is willing to face an unscreened audience in Hugh Hewitt Country but why?

Ben Pershing: That's a good question and I wondered the same thing. Orange County is not exactly booming with Obama supporters (though I just read that he did get 48 percent there in November, which is surprisingly high). But you could argue that California is feeling the heat from this recession as much as any state. The housing collapse really started there, and unemployment is over 10 percent.

Also, I'm not sure what got scheduled first, but Obama was going to Southern California anyway this week to do "The Tonight Show."

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Seattle, Wash.: Any news on Gary Locke's confirmation hearings for Sec. of Commerce?

Ben Pershing: The hearing is going on right now and I have not heard of any fireworks or controversy there. Locke is trying to be balanced, because he is a free trade advocate but has also been trying to reassure fellow Democrats that he will strictly enforce existing trade laws. That was a big part of his opening statement.

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Burke, Va.: About this proposal to put a 98 percent tax on the AIG bonuses -- how is that not the very definition of a bill of attainder (legislation singling out a small group of people for punishment), which is explicitly banned by the Constitution?

Ben Pershing: I have heard some members of Congress express concern about that very issue, including Steny Hoyer. There was also a good post on this subject at one of my favorite blogs -- fivethirtyeight.com. Even if it is constitutional, what do we think of the precedent that would be set here by using the tax code to punish one very small group of people?

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St. Paul, Minn.: Hi Michael -- Thanks for taking questions today. I'm seeing lots of stories about whether the whole AIG bonuses issue with headlines like "bonuses threaten Obama agenda" and the like. Maybe I'm missing something important here, but I'm not sure how this hurts him. If anything, doesn't it give him something else to rail against? Can you please explain?

Ben Pershing: The threat to Obama is that he may be blamed by the public for not stopping these bonuses from happening. That's one reason why the administration is trying to be so aggressive in its response to this. That said, I don't personally believe this is a real long-term threat to his agenda or his political health. It's a setback, but it will pass.

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Philadelphia, Pa.: "I have not seen or heard any reports that Geithner is going to "liquidate" the company"

Wait, isn't that the point of the AIG bailout? We own 80 percent. Liddy and Geithner will pick through the carcass, sell off the stuff that has value, burn that which doesn't, and we get some return on our investment. That's liquidation. There's no future AIG once they're done.

Ben Pershing: It's not a given that "there's no future AIG." That may end up being the case, as this morning's WashPost story made clear, but the goal and hope of the Obama administration is that AIG can survive somehow. Parts of the company are being sold off, but certainly not all of it.

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Washington, DC: Why shouldn't a popular president push for his programs through the budget reconciliation process? After all, budget reconciliation was used by Reagan to get his tax cuts. He set the precedent and provides the model.

Ben Pershing: There's just a debate about what reconciliation is really supposed to be used for. Generally it's used for tax increases or cuts, or spending cuts. Democrats could use it to pass broad social legislation, but it would definitely be controversial. And again, does Obama want to overhaul the entire national health care system with just 51 votes?

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SW Nebraska: How much longer can the GOP stall Al Franken from becoming the senator from Minnesota?

Ben Pershing: It could still be several more weeks. Both sides have rested their cases in the current trial, but Coleman could always file another appeal if he loses. This could go to the U.S. Supreme Court, if Coleman wants to push it that far.

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"No new taxes": Do you think any of the "no new taxes" crowd in Congress would DARE to vote against higher taxes on those AIG bailout bonuses?

Ben Pershing: I think many Republicans probably would vote for an AIG tax bill if it came up, but I think there will be other members in both parties who will be uncomfortable with that approach. As we discussed a few minutes ago, there are constitutional questions as well as some fears about using the tax code as some sort of political weapon.

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Liquidate: Geithner has repeatedly said he is going to wind-down the company. Look! Geithner Says 'Wind Down' of AIG May Accelerate (Bloomberg.com, March 17)

What form that'll take, and what form the perfectly fine insurance companies will go forward in is unclear. But that's all the French were reporting, I think.

Ben Pershing: I believe Geithner is talking about a "wind down" that means paying off the company's credit default swaps and unloading troubled assets. In that same story they call it a "restructuring," which is different from "liquidating" the entire firm.

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Re: 98 percent Tax on Bonuses: Didn't Congress pass special tax provisions exclusively for the benefit of the Gallo family? Twice, I believe. I see that as a precedent for passing special tax provision for these bonuses. You?

Ben Pershing: That's true. It happened in 1978 and 1986 (I just had to look that up) and saved the Gallo family millions of dollars in estate taxes. But that was very controversial at the time, and those provisions actually helped certain individuals, it didn't punish them. So it's not an exact analogy.

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Pittsburgh, Pa.: Anything to the rumor that Norm Coleman will replace Michael Steele?

Ben Pershing: The rumor is out there, having been started, I believe, by Mike Allen over at Politico. It makes sense on one level -- Coleman is a pro, knows how to raise money, and so on. But it's worth remembering that Coleman is reportedly under federal investigation for allegations that a Minnesota financier tried to get money to Coleman by routing it through the company that employs Coleman's wife. Google "Nasser Kazeminy" if you want details. It may turn out to be nothing, but I can't see the GOP picking him while that investigation is still out there.

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Bipartisanship: Bipartisanship is all well and good so long as there are two parties that have the same goal in mind (health-care reform, cap and trade, etc.). But, if the Republicans just want to posture for 2010 without taking any responsibility for what is getting passed, then there can really be no negotiation with them. Then, the Democrats may have to pass with 51 up to 59 votes in Senate. Depends whether Democrats think it's worth it to pass something or let the Republicans stymie.

Ben Pershing: That's all true. But if Democrats begin the health care process by saying they're using reconciliation, then they're basically giving up on getting 60 votes before they've even tried. I would think Obama would at least try to round up bipartisan support first, so if he ends up having to pass it with only Democrats he can at least say he did his best to get some Republicans on board.

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AIG, of course: I, too, am unhappy with the AIG bonuses. Righteous indignation, sure.

This is a small amount of the overall bailout money to the banks.

Let's learn our lesson, which is, to make the contracts, names, and bonus amounts public (we do own 80 percent of AIG, a publicly traded company), and write legislation to limit future bonuses for bailout recipients.

By focusing on this one element, we are missing the chance to make progress on other elements of the economy, plus we have many unfilled slots under the Treasury secretary.

Ben Pershing: You can definitely argue that the AIG bonus issue, as much as it bothers people, just isn't that important when you look at how massive the overall bailout has been and how much more work needs to be done on the economy. A colleague of mine yesterday compared this to the Dubai Ports World scandal. Remember that -- when the Bush administration had to back down from letting a Dubai company take over US ports? In that case, the actual security threat to the nation probably didn't exist but the story was just terrible for the administration on a symbolic level. You could say the same about the AIG bonuses.

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Fairfax, Va.: Was this bonus money from the money given to AIG during the Bush administration or the Obama administration? Basically, who dropped the ball on this money needing to have strings attached to it?

Ben Pershing: I think we're learning that it's everyone's fault. These contracts were put in place awhile ago, so the Bush administration should have known about it, the Obama administration should have known about it, and Congress passed a stimulus bill that could have blocked the bonuses, but didn't. Maybe everyone involved should have their taxes increased to 100 percent.

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Ben Pershing: Thanks for all the good questions, everyone. Until next time .. Go Bears.

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Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.


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