Tim Geithner should probably start packing his stuff. Now. Because what we have in the article in today’s Washington Post called “How the Fed Failed to Tell Obama About The Bonuses” is nothing more or less than an attempt to load up Mr. Geithner with unique responsibility for the AIG bonus fiasco, set him ablaze, and send him drifting out to sea.
When one cuts through all the hooey, this is the narrative that the White House and its media accomplices would like for you to believe: the risk-averse bureaucrats in the Fed made a unilateral decision to allow AIG to award bonuses to the guys who nearly brought AIG down. They did so without consulting with the White House, or much of anyone else. They did so without realizing that it would be a political disaster. The guy at the Fed who did this was Tim Geithner, who, by the way, is now at Treasury and still screwing up royally although The One retains complete confidence in him.
This is nonsense on its face.
According to the Post, the Fed was informed back in January that bonuses would be awarded in the amount o $165 million by March 15.
Chris Dodd who was sucked into the seething maelstrom yesterday when he apparently confessed to Wolf Blitzer on CNN that he inserted the loophole in the AIG bailout that allowed the bonuses has recanted, or rather clarified that statement, by saying:
“I’m the one who has led the fight against excessive executive compensation, often over the objections of many. I did not want to make any changes to my original Senate-passed amendment but I did so at the request of Administration officials, who gave us no indication that this was in any way related to AIG. Let me be clear – I was completely unaware of these AIG bonuses until I learned of them last week.
We don’t know when that happened but we know it happened before February 9 when the Senate passed the stimulus bill.
This quote makes it seem as though Dodd was punked by either Geithner -- I think we can all unite in saying that Geithner doesn’t have that play-it-fast-and-loose aura about him, for heaven’s sake, look at the cheap suits he wears – or by the White House.
The statement, because of Dodd’s assertion that the language was not associated directly with AIG, also leads one to believe we’d better get used to a parade of rich guys getting richer by bonuses paid out of bailout money.
And let’s not forget that at some point this negotiation over language with Dodd passed through the Office of Management and Budget giving additional weight to the notion that Geithner is the fall guy on this.
Treasury Secretary Timothy F. Geithner, a central figure in the decision to bail out AIG last fall as president of the Federal Reserve Bank of New York, said in an interview yesterday that he had not been aware of the size of the bonuses and the timing of the payments.
"I was stunned when I learned how bad this was on Tuesday [March 10]," Geithner said. "I shouldn't have been in that position, but it's my responsibility and I accept that."
Unbelievably, Geithner treated this bid of bad news as a fine wine, hoping that it would improve with age. Allegedly, he called AIG chief executive Edward M. Liddy on March 11, demanding that the bonuses not being paid. Apparently, this resulted in Geithner being invited to perform a physiologically difficult feat, or something similar, and the next day notified the White House.
AIG’s story is a lot different.
AIG executives say the Fed had been intimately involved in reviewing the contracts before the first dime was paid. The payments, which were due by March 15, were ready to be distributed last Tuesday, a senior AIG executive said. But the firm didn't get the go-ahead from government officials to make the payments until late last week.
"We weren't authorized until Thursday night," the AIG executive said. "We were negotiating with the Treasury and the Federal Reserve. Treasury indicated that they needed it cleared by the White House, as well. We hit the go button for the payments on Friday."
What makes this whole story line improbable is this statement:
The Fed officials did not anticipate the political firestorm that would erupt over the bonuses, a senior government official said. "They clearly underestimated the matter," the source said.
A bureaucrat in the Fed is not going to be smart enough to anticipate what is going to happen when $165 million in bonuses is paid out? Don’t believe it. The only reason they didn’t “anticipate the political firestorm” is because they were told to not worry about it.
It is becoming abundantly clear that the White House asked Chris Dodd to modify the stimulus bill language to allow these and other bonuses. (Heaven knows what else was included in that dog’s breakfast of pork and self-dealing that we don’t know about but when you don’t let people read the bill before passage you have no right to be surprised over stuff like this.) What is equally apparent is that AIG was in communication with Treasury and the person they were talking to was not Tim Geithner.
How long the Obama Administration will drag out Geithner’s public humiliation is an open question it is increasingly clear that Geithner is not setting policy; he’s answering phones and taking messages.