Tim Geithner told Congress today that his new program for a private-public partnership on toxic assets has run into difficulties in providing valuation for what Geithner calls “legacy assets,” the latest euphemism from the Obama administration.  That shouldn’t surprise anyone, since Geithner and Obama have difficulty understanding the risks their partners run in participating in the program at all.  Despite their initial insistence that the caps on executive pay from the TARP program would not apply to the toxic-asset partners, Geithner’s own department reached a much different conclusion:

Treasury Department lawyers have determined that firms participating in a $1 trillion program to relieve banks of toxic assets could be subject to limits on executive compensation, contradicting the Obama administration’s previous public position, according to a report to be released today by a federal watchdog agency.

The disclosure comes amid a congressional investigation into whether the administration is abiding by a law limiting lavish pay for executives at firms that have benefited from the $700 billion bailout for the financial system.

Speaking last month about the initiative to buy toxic assets, Treasury Secretary Timothy F. Geithner said, “The comp conditions will not apply to the asset managers and investors in the program.”

But Treasury lawyers have told the special inspector general for the federal bailout that executives involved with that initiative and another $1 trillion consumer lending program “could be subject to the executive compensation restrictions,” according to the report from Special Inspector General Neil M. Barofsky.

Small wonder they’re having problems valuing the assets.  While Congress insists on interfering with executive compensation, few if any people will want to take on the risk of purchasing the assets.  Not only will they most likely lose some money in the trades, the executives will have to forego their compensation.  Why bother taking on risk under those circumstances?

More problematic has been the fumbling on this issue by Geithner and Obama.  This issue should have been resolved at the time Geithner rolled out the program.  Now it looks as though private-sector investors can’t trust the Treasury to know its own laws and regulations, not exactly a confidence builder for the holders of capital Geithner needs for this program.

Remind me again about how exactly Geithner was “uniquely qualified” to run Treasury.  It’s the Gang That Couldn’t Read Straight.