Tim Geithner is now completely on the defensive. In a long letter to Nancy Pelosi, he explained how and why he approved the AIG bonuses (troubling) and described a plan to “recoup” them. The letter will not likely stop the growing chorus of criticism that may well drive Geithner out of office.
Geithner’s new plan will not “recoup” the bonuses at all: It will merely reduce the amount of the next taxpayer handout to AIG from $30 billion to $29.835 billion. This is not likely to quell the outrage: What most people are angy about is that AIG paid $165 million of taxpayer money in “retention” bonuses to executives who blew up the firm (many of whom aren’t at the company anymore).
The more troubling part of the letter, though, is Tim Geithner’s description of his own approval of the bonuses. He says he registered “strong objections” and then asked for a written legal analysis of why the bonuses had to paid. This does not sound like the behaviour a man who has the balls necessary to stand up to the many constituencies that want to roll right over him right now (which is the kind of man we need during this crisis). It sounds like the behaviour of a man who is already thinking of how to defend a decision he knows is a bad one.
What Tim Geithner should have said, in our opinion, was “No.”
We’re also not encouraged by Geithner’s defence of AIG CEO Liddy in the penultimate paragraph (people are being unjustifiably mean to him, apparently). Edward Liddy is the CEO of a Fortune 500 company. By now, he should be able to look after himself.
Our concern about Tim Geithner as Treasury Secretary during this crisis is that he’s too close to Wall Street to make the kind of decisions that need to be made right now. This exchange bears that out.