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AIG bonuses new cloud over Treasury boss

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LAURIE KELLMAN
March 18, 2009
— If not distancing itself from Treasury Secretary Timothy Geithner, the White House is placing firmly on his shoulders responsibility for how the government handled the $165 million in bonuses paid to about 400 executives and traders at American International Group Inc.

"Secretary Geithner last week engaged with the CEO of AIG to communicate what we thought were outrageous and unacceptable bonuses," White House spokesman Robert Gibbs said Tuesday.


Then he volunteered the answer to a question being asked all over Washington: Did Geithner still enjoy President Barack Obama's confidence, given the whopping bonuses the failed insurance giant paid Friday after receiving taxpayer bailout money?


"The president has complete confidence" in Geithner, Gibbs said.


Is Obama satisfied that Geithner informed him of the impending bonus payments in a timely fashion?


"Yes, the president is satisfied," Gibbs replied.


Those, of course, are statements that wouldn't need to be made if Geithner's status were clear. Not just a president's confidence, but his "complete confidence" can be a well-worn political signal that the subject should start circulating a resume.


AIG is the demonized insurance giant now 80 percent owned by the government after getting $170 billion in federal bailout funds to pay money it owed to U.S. and foreign banks. Geithner told senior White House officials about the bonuses last Thursday and they in turn told Obama the same day, according to a timetable provided by the White House.


Geithner sent a flurry of letters to lawmakers Tuesday night on measures he's taking including bringing in Attorney General Eric Holder to try to recover as much of the bonuses as possible.


For the time being, Geithner, formerly president of the New York Federal Reserve Bank, remains a key player in the gargantuan task of slowing the worst economic downturn since the 1930s.


But his future could soon be as murky as the economy's. His short tenure has been shaky at a time when the new president and the Democratic-led Congress are trying to project confidence to the markets and the nation.


When asked, Democrats issued statements of support for Geithner that ranged from concise to vague, but none called for his resignation.


Geithner's nomination was dogged at the start by news that he initially failed to pay $34,023 in self-employment taxes earlier in the decade when he worked for the International Monetary Fund. As treasury secretary, Geithner oversees the Internal Revenue Service.


Although he was confirmed with a third of the Senate voting against him Geithner's rollout of Obama's stimulus package was widely panned for being short on substance and delivered in a televised statement that made him look younger than his 47 years, and more uncertain. The markets tanked.


Not helping his cause was the news this week that Geithner failed to persuade AIG chief executive Edward Liddy to change or cancel plans to pay out the bonuses Friday.


Whatever Geithner's culpability in the AIG debacle, Republicans did much to get the speculation going Tuesday by uttering the "R word," resignation.


"I don't know if he should resign over this," said Sen. Richard Shelby, R-Ala., the Senate Banking Committee's top Republican.


The White House swiftly hit back, supported by Sen. Chuck Schumer, like Geithner a New Yorker and an early supporter of Geithner's nomination.


"Secretary Geithner is a capable, smart and dedicated leader of the Treasury Department. He is the right person for the job in these challenging times," Schumer said in response to a request for comment.


Senate Majority Leader Harry Reid was less concise. Asked how much confidence he had in Geithner, the Nevada Democrat avoided replying directly. Instead, he reframed the premise and suggested a discussion of "what we have accomplished this Congress" and issued something short of a blunt endorsement of Geithner's service.


The economic picture, Reid said, revolves around the fortunes of the housing market.


"I feel very comfortable with what the treasury secretary has done, what the housing secretary has done," Reid said. "Housing is the main focus of the problems we have with our economy. That's where it started, and everyone says, until we work out the housing issue, we will never be at the bottom of this economic crisis."



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