Treasury Knew About Bonuses, But Geithner Didn’t?
By Justin Gardner | Related entries in Bad Decisions, Bailouts, Barack, Money
The AIG bonus plot thickens, but only slightly.
Because while it appears that people in the Treasury department knew about the bonuses, they didn’t think it was necessary to inform their new boss about them?
“Treasury staff was informed about the new bonuses in a Feb. 28 memo that the March 15 [bonus-payment] date was upcoming,” a Federal Reserve source tells TIME. A Treasury Department source, speaking on background, confirmed the e-mail memo and its contents, saying, “Everybody knew that [AIG] had a retention issue.”The New York Fed even went so far as to warn Treasury staffers that the bonuses were a hot-button issue. In the past, the memo says, the “retention,” or bonus, issue has drawn the attention of both Capitol Hill staffers and the media. The New York Federal Reserve forwarded further details of the plan to Treasury on March 5 and even more specifics in a March 9 memo, which Treasury officials had previously said was their first detailed warning of the bonus trouble.
The Treasury Department official says the fault appears to lie with career staffers at the department who failed to report the imminent bonus deadline up the chain to Geithner. This failure may be a by-product of the difficulty Geithner has had staffing up at Treasury. But he still has personal vulnerability on the issue. It was Geithner, as head of the New York Federal Reserve, who negotiated the AIG bailout last September. At that time, he could have sought to get bonuses repealed as part of the massive government loan.
As I’ve stated before, the bonuses are obviously extremely bad form and people have a right to be mad. Hell, I’m mad too.
But Americans need to be cautious about getting too angry over something that’s relatively small potatoes because the only thing that can stop the fixes we need in this financial crisis is exactly this type of disproportionate populist rage.
This entry was posted on Thursday, March 19th, 2009 and is filed under Bad Decisions, Bailouts, Barack, Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
March 19th, 2009 at 7:50 am
Donklephant » Blog Archive » Treasury Knew About Bonuses, But Geithner Didn’t?…
The AIG bonus plot thickens, but only slightly….
March 19th, 2009 at 7:50 am
Justin, I agree with you if you are thinking the cure of breaking these contracts might be worse the disease. The article you quoted was the first time I heard that they were retention bonus. Are they as simple as they seem: stay past a certain date, get the bonus? I’m asking because I don’t I’m ever likely to see one of these myself.
March 19th, 2009 at 8:28 am
A contract is a contract, and the government retroactively breaking them would be a certifiable Bad Thing. They should have gotten out in front of it earlier, as the Fed suggested.
But Justin, your commentary feels dangerously close to apologetics for the Congress and administration. While the dollars are relatively small potatoes, the problem itself is a clear indicator that the government: Bush, Obama, McCain, all of them, had no real understanding of what they were doing back in October nor did they bother to think about the possible consequences of their actions. And this same, go-fast-ask-no-questions approach was used in the “stimulus” bill. The government is making the problem worse, not better. Are we still holding out for a smart government solution in light of how they’ve handled these small potatoes?
March 19th, 2009 at 11:53 am
“But Americans need to be cautious about getting too angry over something that’s relatively small potatoes because the only thing that can stop the fixes we need in this financial crisis is exactly this type of disproportionate populist rage.”
Justin: This really misses the significance of what’s happened.
First, is populist rage really the ONLY THING that can stop the fixes we need? We have yet to hear from Obama/Geithner exactly what they plan to do by way of fixes except in broad strokes that I could have painted. So how do we even know what else stands in the way of fixes?
Second and more important, this “populist rage” is not misplaced or a distraction. It goes to the heart of the questions we all face now:
– Are we right to be spending trillions of dollars of public money to bail out big financial firms?
– If so, which firms and how much should they get?
– What if anything should we require in return for the bailouts? Ownership? Return on the money? Obeisance? New public policies? Stricter regulation?
– Are there counter-risks to pouring these trillions into bailouts? What are they? How do we know where and how they will pop up?
– Who is or should be responsible for making these decisions? The President and his Treasury Secretary? Congress? The Fed? All three?
– Can we trust the judgement of those who will decide? Should we trust them and why?
The situation with respect to AIG seems to be one that can be summed up this way: Based on assertions that an AIG failure would lead to disaster, the company has been given $170 billion by two Administrations in actions expressly authorized by Congress and now, no one seems to know what the company is doing or why it’s doing it or even who changed the language of a recently enacted law or why they changed it. To make matters worse, our trust in all of these public officials is undermined by a daily shifting of stories and attempts to avoid blame.
So how can we have trust and confidence in any of these guys to handle the trillions yet to be spent.
It’s not even about the bonuses. It’s about the control and direction of critically important public policy. Personally, as I have written on my blog, I believe AIG should be nationalized today, split in two, and the toxic half placed in a federal receivership.
Why don’t all those members of Congress who were grandstanding, competing with each other in how nasty they could be to Liddy, and pointing fingers at each other stay up nights to figure out how to clean up the mess? And why is Obama holding a campaign-style rally and appearing on Leno in the midst of all this? To shore up his poll numbers? Come on.
March 19th, 2009 at 10:25 pm
“It’s not even about the bonuses. It’s about the control and direction of critically important public policy. Personally, as I have written on my blog, I believe AIG should be nationalized today, split in two, and the toxic half placed in a federal receivership.”
What John said.