Finding A Scapegoat
Good to see that the Treasury Department is so concerned about the AIG bonus babies that they are throwing Chris Dodd to the wolves to deflect criticism.
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.
That's just not true, as both Jane and Glenn Greenwald explain pretty definitively. Under a Dodd-written amendment, the Senate version of the stimulus bill included executive compensation limits for all recipients of TARP money, only to have the amendment stripped of retroactivity and applied strictly toward future payouts, after negotiations with none other than Tim Geithner and Larry Summers:
The administration is concerned the rules will prompt a wave of banks to return the government's money and forgo future assistance, undermining the aid program's effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.
This wasn't a small behind-the-scenes fight, it was a major contention in the stimulus debate, subject of several articles. Obama's economic team didn't want limits on executive compensation, and Dodd did. The Administration won, and now in the midst of this furor they're trying to rewrite history by putting Dodd and themselves in opposite roles.
Dodd is a threatened incumbent who the right wing has been slandering for months, and now some anonymous official in the Obama Administration has taken the heat off themselves by allowing a firestorm based on a myth. Chris Bowers writes:
Now, some elements inside the administration have reached the point where they are placing blame for something Geithner and Summers did--block legislation that would have stripped the bonuses--on the person who wrote the legislation that would have stripped the bonuses. And that person just happens to be the most vulnerable Democratic Senators in 2010.
Glad to see that some senior administration officials value Geithner and Summers more than either Democratic Senate seats, or even more than honesty. There is a serious problem inside the Obama administration on this matter, and dismissals are needed to solve it.
In a related development, Republicans tied Democrats in the congressional generic ballot in one poll today, and took the lead in the other. I guess the new "Geithner uber alles" strategy isn't working out to well for Democrats.
I think it's premature to hype those poll numbers, especially when other ones taken at the same time show an opposite dynamic, but unquestionably, there is a rot at the heart of the economic team. This is the first incident that Obama has truly owned, regardless of the deflections. Republicans don't completely have their act together on this - they're too conflicted, having argued for free market fundamentalism for so long that the knee-jerk response is to argue for more. Even their ideas for clawing back the bonuses are crude copies of what the President has already decided. But anyone can plainly sniff out the villains here, and in addition to hyping the bogus Dodd assertion, the GOP is going after Geithner.
Reps. Steven LaTourette (R-OH) and Thaddeus McCotter (R-MI) introduced a resolution of inquiry today that would force Geithner to reveal the full extent of his department's communications with AIG.
The resolution would affect not just talks over bonuses but about the very structure of the Federal Reserve's investment in the company -- which appears to have included built-in limitations on the government's influence over management.
This is the real deal, folks: resolutions of inquiry (ROIs) are a crucial procedural tool for the minority party to seek information from the executive branch. Democrats did this during the Valerie Plame/Spygate scandal and the debate over the Bush administration's extraordinary rendition. The Congressional Research Service found in a November study that ROIs oftentimes succeed in prying out information even if they fail on the House floor.
No rational Democrat can disagree that we need to know about those communications. Geithner's connections with AIG go all the way back to the initial bailout decision, and are tied to the tens of billions in payments to counterparties, which is the far more damaging element of this - essentially a double-dip for banks who already received government money. While the bonus scandal raises the right-wing phony populist ire, the drumbeat for more investigations into Geithner's contacts with AIG and what he knows about the counterparties and maybe about why the Federal Reserve is injecting billions into foreign central banks and why more than half of the AIG bailout money is leaking over the border and a whole host of other issues which involve Geithner but also the previous Administration. And the very clear potential exists to drown the entire Administration agenda into a day-by-day recitation of whether the President still has faith in his economic advisers, etc.
The President brought this upon himself through his hirings. But if he wants to find a way out, he could stop the practice of his team blaming others and start living up to his own rhetoric.