March 29, 2009
But, Tim, That’s Simply Not the Question

Posted at 8:10 pm, in: Economic Crisis
Tags: AIG, Bailout, Bonuses, Timothy Geithner

But, Tim, that’s not what he’s asking:

MR. GREGORY: You shared–you said in a letter, you shared the president’s outrage, and yet the reality is that these bonuses first came to light back in October of 2008. You were still at the New York Fed. They were also the subject of hundreds of e-mails between Treasury and the Fed and AIG during the transition and when you came into office. In fact, the Treasury Department even negotiated with Senator Dodd with regard to executive compensation when the Treasury Department said, “No, no, don’t have this deal with retroactive bonuses. We can’t abrogate those contracts.” So if you were so outraged about all of this, why didn’t you deal with this back when these first came up?

SEC’Y GEITHNER: David, how could people not be angry with this? With the challenges we’re facing now as a country in part because of risks our financial sector took on, how could people not be angry? But our obligation and our deep obligation responsibility is, again, to try to fix this problem so that the trauma in the financial system is not causing more damage to the lives and fortunes of Americans and businesses across the country. That’s the most important thing we do. Everything we do has to be judged by the test of whether we’re getting the economy going again and recover…

MR. GREGORY: Well, and that’s all fair. But if you were so outraged, why didn’t you say that then? Instead, you said, “I was outraged and we should try to get this money back.” The government knew about these bonuses several months ago.

SEC’Y GEITHNER: Look, we had no good choices in that context, David. These were contracts written before the government got involved, before Ed Liddy became CEO of AIG.

MR. GREGORY: Mm-hmm.

SEC’Y GEITHNER: We’re a nation of laws. We cannot get the economy going again if there’s an expectation the government’s going to come in and break contracts. Just not a tenable thing to do. But what we did is–and we had no good choices, David–was when, when I was informed about the details of those provisions, we moved very quickly to ask that they–those that could be renegotiated get renegotiated, the government get those–or reduce those payments going forward. And we’re going to use the authority we have to go recoup those payments where we have a good legal basis for doing that. And you’ve already–we’re seeing a lot of those payments returned. But the important thing is going forward that we establish clear conditions, clear rules of the game, prevent this kind of compensation practice in the future from coming back and putting our system at risk. And we want to make sure that where the government is putting up assistance for these, for these banks, that that assistance is going to get lending going again…

MR. GREGORY: Right.

SEC’Y GEITHNER: …not to enrich the people that helped get us in this mess.

MR. GREGORY: But, but my question is, is this: If you thought this was so outrageous at the time, why didn’t you put this on the agenda then? And if you felt that you didn’t have any good choices, that you really couldn’t dissolve those contracts, then when it came to light, why didn’t you and the president stand up and say, “This populist anger is understandable, but you have to understand it has to be put in context and it has to stop”?

SEC’Y GEITHNER: Well, that–but that’s what the president did say. And again, we’re trying to make sure that people understand…

MR. GREGORY: The president said, “We shouldn’t govern in anger,” and then he said, “Yes, I’m angry, too. I don’t want to quell the anger.” You said this was outrageous.

SEC’Y GEITHNER: But…

MR. GREGORY: Did anybody stand up and say, “Let’s put this in context. We didn’t have good choices. This is not worth getting so upset about”?

SEC’Y GEITHNER: But, but, as you’ve seen the president say over the course of the week, the most important thing is we recognize that of course we don’t want to reward failure and we don’t want the government assistance going to reward failure, but we need to make sure we get this economy on–back on track. That’s going to require the financial system getting fixed and repaired. Of course we’re going to put strong conditions on the compensation…(unintelligible). Remember, the first–the second week in office, the president put out very, very broad, ambitious standards on compensation practice. That was before the Congress acted. He was a–took early initiative in this area because we knew this was going to be a significant problem.

I wish I was there because I would have tried to clear it up for you. We get it. These were tough choices that had to be made. The law is the law. People had these contracts that the government couldn’t just re-write. I think we all understand that.

The question is not about the bonuses, it’s about your and President Obama’s faked ignorance and outrage at said bonuses. Real leadership would have called on you and Obama to explain all of this to us when the deal was being made. At the very least, you would have stood up and explained it to us when the news broke, rather than pretending you didn’t know and acting as if you were as angry as we were.

You were dishonest with the American public because they weren’t accepting of your plan at the time, and they definitely were disapproving when these little tidbits came out. We are in uncertain and tumultuous times that require leadership. Obviously, you and your boss don’t get that and don’t have the capability to deliver.