A Project of The Annenberg Public Policy Center

Bailout Bonuses Are Back


A TV ad in Arizona’s 1st Congressional District and a mailer in Ohio’s 15th both accuse Democratic candidates of voting to give out huge Wall Street bonuses. That’s way overblown. The American Recovery and Reinvestment Act, also known as the stimulus bill, included less stringent restrictions on bonuses than those in an earlier version of the legislation, but that’s hardly the same as handing out bonuses.

The Arizona ad, funded by the National Republican Congressional Committee, says that Rep. Ann Kirkpatrick voted for "a failed stimulus that gave Wall Street bonuses and created more debt." The NRCC cites a Politico article, which said that the provisions limiting bonuses at firms that had received funds from the law that created the Troubled Asset Relief Program, passed in fall 2008, had been "watered down" in the final version of the stimulus bill. We said the same in our 2009 article " ‘Blame Dodd’ Attacks Ignore Facts." But the amended law didn’t give out any bonuses — it just didn’t prevent as many of them as it could have.

As passed by the Senate, the bill would have forbidden any firm that had received funds from TARP from giving out executive bonuses. But the White House and the Treasury Department wanted softer language, citing practical and legal concerns. (Treasury Secretary Tim Geithner told CNN that "we wanted to make sure [the bill] was strong enough to survive legal challenge," but The Hill newspaper reported that the administration worried firmer limits would be counterproductive because small banks would refuse TARP loans.) 

In the end, only bonus agreements made after Feb. 11, 2009, were banned under ARRA. That means that the law allowed — or at least didn’t prevent — many executive bonuses already allotted by TARP-receiving firms. But it’s far from true that the stimulus law "gave Wall Street" those bonuses. The firms got money from TARP, not ARRA, and the funds were not intended for bonus pay.

The Ohio mailer targets Rep. Mary Jo Kilroy for voting for "the stimulus bill that helped Wall Street executives get rich." It’s funded by the Ohio Republican Party and the campaign of Kilroy’s opponent, Steve Stivers. But the stimulus didn’t do anything that actively "helped" the executives "get rich" just because it didn’t reach back in time and forbid all bonuses since the enactment of the bailout.

The mailer gets it partly right in the fine print — it says that the stimulus bill "allowed executives at failed Wall Street companies to collect more than $165 million in bonuses paid for by our tax dollars." That’s more accurate than saying it "helped" the corporate chieftains get their money, or than saying it "gave" the funds out, as the Arizona ad claims.

Did the bonuses come from "our tax dollars," via TARP? There was no money in TARP designated for bonuses, and certainly the bailout funds weren’t intended for such a use – but the law didn’t explicitly prevent it, either, which is why the issue came up when the stimulus was being debated months later. Money being fungible, we’ll call the mailer technically correct on this claim.