19 March 2009

Time: Treasury Knew About AIG Bonuses Prior to Geithner Claims

Yesterday I wrote about the uncomfortable position in which Chris Dodd finds himself over the language of the loophole that paved the way for the current AIG retention bonus scandal. And I intimated that Treasury Secretary Tim Geithner is quickly becoming the target of my ire.

Via TPM, Time magazine reported yesterday that Treasury staffers were informed about the AIG bonuses on February 28 in a memo from the New York Federal Reserve. Geithner spoke to congressional leaders this week and said he first knew about the bonus plan on March 10. Uh oh.

If Time's telling of the details is correct, then Geithner is on the hook for what his staff--insomuch as it exists--didn't communicate up the line. That's the best-case scenario. It's gonna look much worse if Geithner did get the message and misrepresented key chronology before congressional leaders.

To be fair to Mr. Geithner, he still does not enjoy the benefit of a full staff. And to make matters worse, he can't just go out and hire the most qualified people he knows, because those people either a) owe taxes on nannies or employed an illegal immigrant once or b) are connected to the key financial entities at the middle of this debacle. Should Treasury jump to make quick hires, the appearance of (further) tolerance for tax cheats or coziness with consultants to the recently-tarred banking industry would not work in the Administration's favor. Adding insult to injury, the handful of people who actually get named for posts at Treasury seem consistently to eliminate themselves from consideration.

So I get it that the flow of information at the Treasury might be rough. But that's not an excuse that'll fly before Congress.

What's more, the article points out that the memo from NY Federal Reserve to Treasury was sent three days before the Administration ponied up an additional $30 billion in bailout funds to AIG. That emergency arrangement may have been too far advanced to be stopped over a trifling $160 million in fine print, but taxpayers are looking to the Obama Administration to protect bailout funds before those funds can be scattered to the four winds.

And Obama?

Geithner received solid backing from President Barack Obama on the South Lawn on Wednesday before the President left for California. "I have complete confidence in Tim Geithner and my entire economic team," Obama said. "Nobody is working harder than this guy. He is making all the right moves in terms of playing a bad hand."

All right. My impression of the president is still more favorable than my impression of the secretary. But if Treasury's (mis)management of bailout negotiations continues to decompose before our eyes, then the White House is very much on the hook as well.