From the September 4 AP article:

Dodd faces a tough re-election fight next year after being embroiled in a sweetheart loan scandal and legislation that allowed bailed-out insurance giant AIG to pay out millions of dollars in employee bonuses.

AP ignored that Senate Ethics Committee cleared Dodd in Countrywide loan “scandal”

Senate Ethics Committee dismissed complaint after spending year reviewing 18,000 pages of documents. On August 7, the Select Committee on Ethics wrote to Dodd that “the Committee finds no substantial credible evidence as required by Committee rules that your Countrywide mortgages violated Senate ethics rules.” The letter stated:

No Credible Evidence of an Ethics Rule Violation

After examining the extensive record before it, the Committee found no credible evidence that you knowingly accepted a gift, including a loan not available to the public.

First, your mortgages were made in a commercially-reasonable manner based on terms and conditions available to borrowers with similar loan profiles. While your Countrywide loans were handled through the V.I.P. loan unit and designated as F.O.A. loans, the service you received was available to thousands of other non-Senate customers at Countrywide and the loans you received appear to have been available industry-wide to borrowers with comparable loan profiles. It appears your loans met all applicable underwriting standards and that you and your wife were excellent loan candidates and established Countrywide customers in good standing. You sought competing mortgage offers from other lenders that offered terms substantially similar to the ones Countrywide provided. There is no evidence that the interest rates for your Countrywide mortgages were below prevailing market rates.

Second, there is no credible evidence that you sought or knowingly received any financial benefits not available to other borrowers with similar loan profiles. The Committee has found no evidence that you or your wife ever asked for special treatment or that anyone ever communicated to you or your family that you were receiving specific discounts or other special treatment not available to other borrowers because of your status as a Senator.

Third, there is no credible evidence that you used your official position for personal gain. The Committee found no evidence that you fully understood the scope of the V.I.P. program, knew that you were in the “Friends of Angelo” program, or attempted to use your status as a Senator to receive loan terms not available to the public.

AP ignored that Dodd's proposal restricted bonuses companies like AIG could pay

Bonuses would have been paid out with or without recovery legislation. In reporting that Dodd's re-election chances were damaged because of “legislation that allowed bailed-out insurance giant AIG to pay out millions of dollars in employee bonuses,” the AP ignored that the bonus payments did not require any legislation approving them; rather, those bonuses would have been paid out unless Congress passed legislation to prevent it.

Dodd introduced compensation restrictions into Senate version of Recovery Act. Dodd's Recovery Act amendment as introduced directed the Treasury secretary to require each TARP recipient to meet compensation regulations, including “a prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period that the obligation is outstanding to at least the 25 most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.” The Senate adopted Dodd's amendment by voice vote, and it was included in the version of the stimulus bill initially passed by the Senate.

Conference committee version scaled back Dodd's amendment by exempting contracts agreed to before February 11. The conference committee assigned to work out the differences between the Senate version of the recovery bill and the House version -- which did not contain such a limitation on executive compensation -- included Dodd's amendment "with several modifications" in its version of the bill. Among those modifications, the bill adopted by the conference committee included the following language:

The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary [of the Treasury] or the designee of the Secretary.

The amendment as modified by the conference committee was included in the final recovery bill passed by Congress and signed by President Obama.

Dodd: “The alternative was losing the entire section of executive compensation. ... I agreed reluctantly.” As FactCheck.org noted, administration officials reportedly feared that Dodd's tough compensation restrictions would discourage banks from participating in the TARP program or would not stand up to legal challenges. Dodd stated on CNN's The Situation Room, “The alternative was losing the entire section of executive compensation. This is not uncommon. I agreed reluctantly. I was changing the amendment because others were insistent.” [The Situation Room, 3/18/09]

Bush administration approved AIG bailout with knowledge of bonus program. AIG reportedly disclosed that it had entered into agreements to pay the bonuses more than a year ago, and the Bush Treasury department approved of the AIG bailout with this agreement in place, a fact that numerous media outlets ignored at the time. A Politico article posted on March 17 stated that "[t]he bonuses were essentially a nonissue when AIG got its initial bailout money, almost $150 billion under President Bush in the two months surrounding the presidential election." The Washington Post also reported on March 17 that “AIG disclosed its retention-payment program more than a year ago, and the amount of the bonuses -- more than $400 million for Financial Products alone -- had been widely reported.”

AP's version of bonus history in line with conservative media smears against Dodd

Conservative media figures blamed Dodd for AIG bonuses. The Drudge Report, Fox News personalities, and radio host Michael Reagan blamed Dodd for the AIG bonuses and misrepresented the legislation to claim the bill protected the bonuses, when in fact the amendment restricted future bonuses, and the AIG payments would have taken place with or without the legislation.