8-ball sez, “Signs Point to Yes.”
In a NYTimes article(read the whole thing, it’s excellent), it appears that lots of people were aware that a significant round of bonuses were due to be paid out on March 15, but those people did not include Timothy Geithner:
Mr. (Representative Elijah) 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.
“I assumed that they were well aware of it and would take appropriate action” before the March 15 deadline, Mr. Cummings said. “In light of the biggest quarterly loss in history, you would think that A.I.G. and Mr. Liddy would have been able to convince folks who were supposed to be getting these retention payments, based at least in part on performance, that they might want to voluntarily not take all or part of them.”
Treasury and Fed officials said they knew that A.I.G. paid $55 million in bonuses in December.
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.
It was Geithner’s JOB to know. And his Wall Street background presumably would have given him some sense as to how bonuses would be paid out. And one would have thought that public outrage regarding AIG would have made him at least check into what was coming down the chute. One would have been wrong.
Plus, according to Rep. Brad Sherman (D-CA), the legislative branch gave treasury the powers to address such bonus abuses.
In yet another excellent article from Talking Points Memo, Sherman said:
We had a provision in there that said Treasury was supposed to establish, by regulation, standards for executive compensation. We required that to be done — had it been done, it would have been binding, whether [or not] these contracts had been signed earlier. It’s entirely within the power of the federal government to have contracts modified [at companies receiving public aid]. Nixon had contracts modified by the federal government. We gave a similar power to Treasury.
Sherman voted against the bailout, he explained, because he didn’t believe that Treasury would use the power given to it by Congress. As it turned out, the department ultimately exercised its executive compensation powers last month, but the final regulations were riddled with loopholes — and only applied to companies receiving “extraordinary” assistance from the government in the future, a standard that no company has officially met so far.
It now appears that the Obama administration may be forced to recoup the $165 million by taking it out of the next multibillion dollar payoff to AIG. Of course, by then, the traders who helped create this financial disaster will all have purchased new villas and cases of the finest Chateau Lafitte.
Someone, other than Robert Gibbs, who is dancing as fast as he can on this, is going to have to explain this to the American people. Perhaps on the same day that Geithner is relieved of his duties.