Feds knew about new AIG bonuses for months — but Geithner only found out last week; Update: “Complete confidence” in Geithner, says WH
posted at 3:35 pm on March 17, 2009 by Allahpundit
Just a speed bump on the road to government-managed glory. Nationalization fever — catch it!
The Treasury and Federal Reserve officials said they had known about the bonus program as far back as last fall. The program has provoked public protests from a handful of critics and at least one Democratic lawmaker in Congress — Representative Elijah E. Cummings of Maryland, a member of the House Committee on Government Oversight, who demanded without success in December that A.I.G. provide information about the bonuses.
Mr. Cummings said he had been communicating regularly with A.I.G.’s chief executive, Edward M. Liddy, about the bonuses ever since December. Mr. Cummings said he was particularly concerned that the bonuses were supposed to be paid by March 15, adding that he assumed Treasury officials had the same worries…
But administration officials said that the Treasury secretary, Timothy F. Geithner, did not personally become aware until last week that an even bigger round of payments was due on March 15. Administration officials said Mr. Geithner learned of the deadline early last week, when the Federal Reserve Bank of New York alerted him that the bonus payments were coming due…
A.I.G. executives said they would never have proceeded with the bonus payments before getting approval from the Treasury and the Federal Reserve.
“We would never make any important business decisions without discussing them with our government managers and owners,” said one executive, who did not want to be identified because of the sensitivity of the matter.
They paid 73 retention bonuses worth more than $1 million in all, says New York AG Andrew Cuomo, and 11 people took the money and ran. Good riddance to bad rubbish? Not so much: Read Andrew Ross Sorkin’s analysis in this morning’s Times about the special danger of AIG employees walking away. Canceling the bonuses not only sets a bad precedent for abrogating contracts and scares away talent from a company that needs it, but those who leave “might simply turn around and trade against A.I.G.’s book.” In other words, having built the company’s complex-derivatives bomb, says Sorkin, they might be the only ones who can defuse it. Does that make the bonuses a form of ransom payment? Why not demand that we double them while they’re at it?
Lest it find itself out-populisted by The One and the Democrats, the GOP’s allegedly getting ready to float its own plan to recapture the bonuses. Exit question: Good politics or bad politics?
Update: Let me borrow my exit question from the Schumer thread and rework it here. Who’s going to last longer, AIG or Tim Geithner?
“The president has complete confidence” in Geithner, Gibbs told reporters.
In Washington terms, “complete” and “confidence” are the two words no public official ever wants to hear, often a harbinger of trouble. And with public and congressional fury growing over the $165 million in bonuses, Geithner’s role in the situation is getting close scrutiny…
Asked by a reporter if Geithner had failed to understand the magnitude of the political problem that the bonuses would represent, Gibbs said that would be “very unfair” to Geithner.