The thought has surely crossed Chris Dodd's mind more than once these past few days: Is this how Barack Obama treats his friends?
When word spread a week ago that AIG had used $165 million in federal bailout money to lavish bonuses on the same executives whose incompetence had forced the insurance giant to the trough in the first place, unusually intense public anger erupted and leaders from both parties rushed to condemn the payments.
For Obama, this was a particularly sensitive development. Along with his Treasury secretary, Tim Geithner, the president was poised to propose a massive and complex scheme to relieve beleaguered banks of toxic assets. But the public's rage at the AIG bonuses threatened to sabotage efforts to build support for what would amount to another huge federal bailout—especially if it could be shown that Obama and his team had actually played a role in allowing AIG to dish out the bonuses.
In fact, that's exactly what had happened, back in February, when the $787 billion stimulus bill was working its way toward passage. At that time, Dodd, the chairman of the Senate Banking Committee, tacked on an amendment to the stimulus that applied strict limits to all existing and future executive compensation packages at firms receiving federal bailout money. Wall Street, predictably, was apoplectic—and Geithner rushed to its defense, pressuring Dodd to water down his amendment so that it only applied to future packages. Dodd ultimately relented, the stimulus was passed and signed by Obama, and the groundwork was in place for AIG to cut those fat bonus checks.
This all played out relatively quietly; it wasn't until the AIG bonuses came to light that the masses began demanding answers. At that point, it was time for the White House to go into damage-control mode—and that meant sacrificing Dodd. Two Saturdays ago, in a New York Times story that detailed the then-emerging bonus story, an "administration official," speaking anonymously, did his or her best to keep the focus off the White House and on Connecticut's senior senator.
"The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place," Times reporters Edmund L. Andrews and Peter Baker wrote.
From a public-relations standpoint, the ploy worked brilliantly. Dodd, reeling from months of media scrutiny of his dealings with the financial industry, spent last week as the de facto fall guy for the bonuses. A popular narrative emerged: After taking in $100,000 in donations from AIG employees in 2007 and 2008, the bought-and-paid-for Dodd had turned around and snuck into the stimulus bill a cozy little provision that gave those same employees a giant payday—on the taxpayers' dime.
All week, Dodd furiously protested his innocence and tried to note that he'd actually been pushing to ban the bonuses that now have the country in an uproar. But it didn't do him any good: The media had found a perfect target. Finally and very belatedly, Geithner admitted in a television interview that, yes, as it turned out, his department had prodded Dodd to water down the amendment. But Geithner's lame admission was barely a whisper compared to the week of screaming and shouting directed Dodd's way. Already in trouble heading into his 2010 reelection campaign, Dodd is now saddled with the widespread perception that, someway, somehow, he was the guy who made the AIG bonuses possible. You can see the anti-Dodd campaign ads now.
On a Machiavellian level, the White House's treatment of Dodd is understandable. The alternative to pinning the blame on him would have been to be straight from the beginning—meaning to admit that it was Geithner, presumably with Obama's blessing, who championed the provision that paved the way for the AIG bonuses. But to do that would have meant sacrificing Geithner, whose two-month tenure has already been marred by controversy and limited public confidence.
Even before the bonus scandal, Geithner was hearing calls for his head; if he were the fall guy, he'd never survive. And given Geithner's central role in Obama's pending push to address the banking system—and importance of that plan to Obama's long-term success as president—Geithner (in the White House's view) was simply too sacred to be sacrificed.
The political price of serving up Dodd, on the other hand, is far more manageable. In the worst case, it means that Obama's party will lose a Senate seat in Connecticut in '10—not a desirable outcome for the president, of course, but not nearly as bad as losing his Treasury secretary at this point in his administration. And losing Dodd as banking chairman wouldn't be that devastating to the White House, either, with another Democrat simply stepping in and taking his gavel.
But at a personal level, Obama's willingness to abet the scapegoating of Dodd is as cold as cold gets.
By all accounts, the two men weren't acquainted until Obama entered the Senate in 2005, but Dodd proved an invaluable ally when Obama sought the presidency last year. In case you forgot, Dodd also ran for the 2008 Democratic nomination, and his most enduring contribution to that campaign probably was an assist to Obama—at a time when Obama most needed it.
That was on Oct. 30, 2007, when the Democratic candidates met for a debate in Philadelphia. Hillary Clinton, as she had been for the entire race, was the runaway favorite for the nomination, while Obama—supposedly her strongest rival—was facing second-guessing from the media and party establishment about whether he had the right style and strategy to topple her.
Toward the end of the debate, Clinton was asked a seemingly innocuous question about then New York Governor Eliot Spitzer's plan to allow illegal immigrants to qualify for drivers' licenses. She waffled, not wanting to serve up Spitzer, but also not wanting to be so supportive that Republicans could use the moment against her in the general election. When Clinton told moderator Tim Russert that "I did not say that it should be done, but I certainly recognize why Governor Spitzer is trying to do it," Dodd pounced.
"Wait a minute," Dodd interjected. "No, no, no. You said yes, you thought it made sense to do it."
Clinton had been hoping to skate by with double-speak, but Dodd's interruption stopped the debate in its tracks and the rest of Clinton's rivals piled on. It may have been the most significant moment of any of the dozens of Democratic primary debates. Clinton's double-speak dominated news coverage for days, reinforcing one of the prime arguments against her candidacy, and for Obama's—that she was unwilling to stake out positions on principle, the polls be damned. The urgency that propelled Obama's campaign may have been born that night.
Then, a few months later, after his own campaign had officially fizzled out, Dodd endorsed Obama—a somewhat risky move on his part, because the nomination had yet to be settled. Plus, he had been one of the Clintons' most loyal friends in the 1990s, serving as general chairman of the DNC during Bill Clinton's 1996 reelection campaign (at Clinton's request). Dodd's endorsement signaled a new willingness on the part of Bill and Hillary's old Washington friends to embrace Obama as the new Democratic standard-bearer.
For his service, Dodd was rewarded the traditional way: Obama made sure his name was prominently leaked in connection with the Democratic vice presidential nomination last summer. And now … this. As he watches his poll numbers plummet in Connecticut, Dodd must be wondering if it was really worth it to speak up at that debate back in Philadelphia.