Veteran senator Dodd in the eye of AIG bonus storm

WASHINGTON, (Reuters) – In a capital always  looking for someone to blame, a powerful U.S. Democratic  senator has a big bull’s-eye on him in the firefight over  taxpayer-funded bonuses for executives at insurance giant AIG.

Christopher Dodd, chairman of the Senate Banking Committee  and one of the more prominent faces of the Democratic Party, is  scrambling to explain how a loophole ended up in legislation  that allowed the roundly condemned bonuses to go forward.

At issue is a clause in the $787 billion economic stimulus  plan approved by Congress in February that capped bonuses for  executives at companies getting federal bailout aid.

A one-paragraph provision tucked into the thick bill  modified the cap to apply it only to future bonuses, not those  that might have already been legally contracted.

This had the effect of allowing the $165 million in  American International Group Inc bonuses to go forward. Dodd, who is running for re-election in 2010, ac-knowledged  on Wednesday he played a role in developing the legislation  after CNN quoted a Treasury Department official as saying  Treasury had talked to Dodd about such a clause, while not  explicitly recommending it.

But Dodd said he acted at the behest of the Obama  administration, although he would not say who made the request  — injecting an air of mystery into this week’s political  feeding frenzy over the AIG bonuses.

“I did not want to make any changes to my original  Senate-passed amendment but I did so at the request of  administration officials, who gave us no indication that this  was in any way related to AIG,” Dodd said.

“Let me be clear — I was completely unaware of these AIG  bonuses until I learned of them last week.”

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