Tuesday, March 17, 2009

It's CYA Time?


So really, who knew what, and when?

One minute we're told,
Attorneys working for the Fed had been examining the matter for months and determined that the retention payments couldn't be touched because AIG would face costly lawsuits and be subject to penalties from states and foreign governments.
The next, it's,
U.S. Treasury Secretary Timothy Geithner found out about the impending bonuses to executives at insurer AIG last Tuesday and alerted the White House on Thursday, an administration official said.
If I were to interpret the second article uncharitably toward Geithner, I would say that Geithner found out Tuesday that the bonuses were going forward (that's the literal claim), not that he first learned about them on Tuesday. If in fact he didn't learn of them at all until Tuesday, who kept him in the dark and have they been fired yet?

Let's not forget - Timothy Geithner's job before he became Secretary of the Treasury was president of the Federal Reserve Bank of New York. Was he kept in the dark by all of his employees at both jobs? Even as he engineered the takeover and bailout of AIG?

(And enough with the anonymous sources - start naming names.)
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And it keeps coming:
Geithner waited 2 days to tell Obama about AIG bonuses

A new timeline released by White House officials late Tuesday evening reveals the president first learned about the $165 million in AIG bonuses last Thursday, days before the story leaked to the media over the weekend.
Thanks for the (lack of a) link, guys. Now I gotta go find that timeline....

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Well, Tim Geithner's sticking with his "I didn't know until Tuesday" story - he put it in writing. If only the Washington Post had named its sources, we might be able to figure out how so many other people knew of it for months, including lawyers who worked for Geithner at the Fed, while he was in the dark. Even though Geithner claims Liddy sprung this on him at the last second, he has nothing but praise for the man. It's enough to make me think that Liddy could blow the lid off of Geithner's cover story. But I guess I"m just suspicious by nature.

There's also this doublespeak from Press Secretary Robert Gibbs:
Q. Robert, we understand from your answers here that you don't have knowledge of the exact timeline, but would it be accurate to say that you were blind-sided, that the President was blind-sided by this?

MR. GIBBS: No. And I will certainly seek better timeline answers to enumerate the negative answer I just gave you.

Q. Why wouldn't it be accurate to say that?

MR. GIBBS: Because the Secretary obviously took steps last week to lessen the blow of what was both contractually obligated and what had been promised but was not part of a contract that lessened the amount of money that was paid out.

Again, the Secretary of Treasury did good work in changing what was potentially out there, and I think obviously he did so in order to protect the American taxpayers. And that's why I think - that's the basis for me answering that question.
Geithner protected the American people by taking steps to lesson the blow, even though those steps proved ineffectual, and that meant that two days later when he finally got around to telling Obama, nobody was blindsided? What part of that makes sense.

Julie Hirshfeld Davis does some actual reporting, pointing out that this was on the radar screen (and by implication should have been very much within the awareness of Geither in his former position, as long ago as November:
AIG's plans to pay hundreds of millions of dollars were publicized last fall, when Congress started asking questions about expensive junkets the company had sponsored. A November SEC filing by the company details more than $469 million in "retention payments" to keep prized employees.

Back then, Rep. Elijah E. Cummings, D-Md., began pumping Liddy for information on the bonuses and pressing him to scale them back. "There was outrage brewing already," Cummings said. "I'm saying (to Liddy), 'Be a good citizen. ... Do something about this.' "

Around the same time, outside lawyers hired by the Federal Reserve started reviewing the bonuses as part of a broader look at retention and compensation plans, according to government officials who spoke on condition of anonymity. The outside attorneys examined the possibility of making changes to the company plans — scaling them back, delaying them or rescinding them. They ultimately concluded that even if AIG's bonuses were withheld, the company would probably be sued successfully by its employees and be forced to pay them, the officials said.

In January, Reps. Joseph E. Crowley of New York and Paul E. Kanjorski of Pennsylvania wrote to the Federal Reserve and the Treasury Department pressing the administration to scrutinize AIG's bonus plans and take steps against excessive payments.

"I at that point realized that we were going to have a backlash with regard to these bonuses," Kanjorski said in an AP interview. In a meeting with Liddy later that month, he said he told the AIG chief that "all hell would break loose if we didn't find a way to inform the public ... and that we should take every step to put that information out there so we wouldn't have the shock."
All of this eluded Geithner, engineer of the AIG takeover?
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In an unsigned editorial, Fred Hiatt's crew is suggesting that Tim Geither is either incompetent or a liar (the bonus plan, apparently, was public information for the past year, and everybody knew about it), and is telling everybody else to get over it:
Thus, the attorney general of New York, Andrew M. Cuomo, among other Democrats, floated the argument that the AIG employees should get stiffed because "it is only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money." True. But the bonuses were set in motion well before the U.S. takeover of AIG, which was done to avoid a Lehman Brothers-like meltdown that would have cost taxpayers a lot more than $165 million, and the compensation plan has been public information for a year.
Hiatt's crew also suggests that AIG "is hemorrhaging knowledgeable employees" and not paying bonuses, with no exception indicated for bonuses paid to people who have already quit, "would probably accelerate the exodus, with the likely effect that the country would lose much more money on AIG than it would otherwise." If the situation at AIG is so bad despite these bonuses, perhaps it's time to think of solutions that don't depend upon the work of people who can't be replaced (even as other Washington Post editorials suggest that they've already been replaced).

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