Bonus Scandal: Four Questions on Geithner and Summers

by: Chris Bowers

Tue Mar 17, 2009 at 22:00

Here are the four main questions about Larry Summers and Timothy Geithner's role in the bonuses scandal:

  1. When did they know about the bonuses? The current line from the administration is that Geithner did not know about the bonuses until last week. However, according to the Washington Post, attorneys working for the Federal Reserve Bank knew about the bonuses for months. If Fed lawyers were working on this for months, was Timothy Geithner, former head of the Federal Reserve Bank of New York, current Secretary of the Treasury, and negotiator of all three AIG bailouts really unaware of this until last week?  Really?  If so, who kept this information from him?

  2. Why weren't the bonuses disclosed before the Senate voted to release the second half of bailout funding? Clearly, given that Federal Reserve lawyers were working on blocking the bonuses for months, some government officials knew about the bonuses before the Senate voted on January 15th to release the second $350 billion of TARP funding. Given the current furor, I think it goes without saying that public knowledge of the bonuses in January could have altered the outcome of that vote, or at least convinced Senator Banking Chair Chris Dodd to take up the TARP Reform Act passed by the House. Given that, three days before the Senate vote, Larry Summers sent a letter to Congress urging them to release the TARP funding without any new legislative requirements, if he knew about these bonuses back in January that would be a pretty severe case of denying legislators relevant evidence before a critical vote. Even beyond Geithner and Summers, anyone in the government who knew about this but did not bother to tell either the Senate or the media tampered with that vote.

  3. Why were Geithner and Summers working as recently as last month to water down legislation that would have blocked executive bonuses? If Geithner and Summers are both so outraged by the bonuses given to employees of financial institutions receiving bailout money, then why were they working, as recently as last month, to water down legislation that would have retroactively blocked such bonuses? When Senator Chris Dodd had included legislation retroactively blocking bonuses for employees of financial institutions receiving bailout money, he received a personal call from both Larry Summers and Timothy Geithner asking him to drop the retroactive aspect of that legislation. Eventually, Geithner and Summers prevailed, as the legislation was watered down significantly.

  4. Why did Geithner and Summers both say there was no way for the government to get the bonuses back, when there obviously is? Over the weekend, Geithner and Summers both publicly declared that there was no way for the government to force the individuals who are scheduled to receive these bonuses to pay those bonuses back to the government. However, Summers and Geithner were obviously wrong. Over the last two days, dozens of Democratic member of Congress have either introduced, co-sponsored, or set a deadline for introducing legislation that will place a 100% surtax on these bonuses, thus forcing the recipients of these bonuses to pay them back to the government.  Given that there was a fairly obvious solution to get the bonuses back, why did Geithner and Summers, who are supposed to be such leading thinkers on finance, declare in public that there was no solution? As I asked last night, are they lacking in imagination, or are they protecting someone?
These are the questions that still have not been adequately answered about the role Geithner and Summers played in the AIG bonus scandal. Journalists and activists of all stripes need to keep asking them. This is not a small issue, since the same people who are being given these bonuses are being entrusted by Timothy Geithner with hundreds of billions of dollars of taxpayer money to get the economy back on track. If we can't trust the person giving the money, or the people receiving it, then they need to be fired and replaced with new people who will do a better job.
Chris Bowers :: Bonus Scandal: Four Questions on Geithner and Summers

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Awww (2.00 / 4)
Number 1 destroys all of the reason for the wanking that has gone on all day here at Open Left. Oh well, you had a really good day smearing Geithner. So much wanking!

And you seem to be conflating executive compensation with executive bonuses.

And fyi, here is an ABC News take on the timeline:

how so? (4.00 / 5)
"Don't ask me, I'm just the boss" is not a particularly compelling indication of competence.  We certainly didn't accept this sort of defence from Reagan in Iran/Contra or Bush with Katrina.  

Geithner is supposed to know.  This issue mattered enough to him to lobby Dodd to drop his anti-bonus legislation, and the various perqs enjoyed by executives for amounts as small as $400G for a getaway have already been taken ill.  Just as a matter of politics, he is ill serving Obama to not keep on top of unseemly rewards for the people seen as having caused the crisis.  


[ Parent ]
He has more imprtant things to worry about (0.00 / 0)
like getting the banks up and running, working on the stimulus, getting credit flowing and coming up with a  toxic assets plan.

I rather him not waste his time (especially since he doesn't have any deputies or confirmed assistants because of the shitty gotchu media and even some of the blogs) reading through thousands of legal pages of each company we bailed out to see who is getting bonuses and how to stop them. That's not his job; his job is getting the economy moving again and he seems to be doing a good job so far seeing that bank stocks are up ~100% over the last two weeks and they are finally making some profits and refusing more bailouts (even the bad cases like citi and BoA are moving up).

[ Parent ]
Oh come on. (4.00 / 1)
Like Heckuva Job Brownie had "more important things to worry about" than Hurricane Katrina.

Montani semper liberi

[ Parent ]
This maybe the moment that true 'bi-partisanship' (4.00 / 2)
steps forth.

Call for hearings like the Pecora Hearings;the American people have a hunger for real answers about how we got to this point.

I daresay any hearing like this will threaten Geithner and Summers but I think it will be good for the progressive movement:it will show the true dangers of corporatism.


Obama and Geithner/Summers = (4.00 / 2)
Lincoln and McClellan/Stanton

Save Our Schools! March & National Call to Action, July 28-31, 2011 in Washington, DC: http://www.saveourschoolsmarch...

okay (2.00 / 4)
this is all getting silly. Spending this amount of time over .1% of the funds is crazy and unserious.  

Why was this HRed? (4.00 / 1)
What is wrong with you people? My God I hope President Obama doesn't listen to the vultures around here.  

[ Parent ]
"crazy and unserious" (4.00 / 3)
Is a tad less than constructive, hmmm?   Though, given the inauspicious recent history of the "serious" people, the latter may be in fact a compliment.  

[ Parent ]
Disagreeable, but worthy of a troll rate? (4.00 / 2)
Why, because someone has the gall to think that maybe this is overblown?  

[ Parent ]
im sorry (2.00 / 2)
but just last week this whole board was going batshit that the media and some republicans were acting as if earmarks were a big deal. At least they were at least 1%!

[ Parent ]
It's only a big deal (2.00 / 2)
when Chris Bowers says it's a big deal.

And note to everyone, it's not a big deal. I've barely heard it mentioned anywhere in the past two days with anyone I talk to. My sister brought it up this morning, but finished the conversation with a great big "Thank God Obama is President"

[ Parent ]
This might blow your mind: (0.00 / 0)
1) Those four questions strike me as critically important. I hope that people in government, up to and including Obama, are held accountable.

2) Thank God Obama is President.

[ Parent ]
No, they weren't (4.00 / 1)
They appropriated no new money. They just set aside already appropriated money for particular areas.

This, on the other hand, is an attempt to screw money out of us via the threat that they'll take even more otherwise. It may be only 0.1%, but that's still $150m and a line has to be drawn somewhere. Otherwise we'll keep giving them the bigger bailouts without conditions.

Forgotten Countries - a foreign policy-focused blog

[ Parent ]
BS (0.00 / 1)
If you let the little things go, the next crime will be bigger.

They're playin' us for saps, and you're happy that they only stole a small portion of our money.


"It sounds wrong...
     ...but its right."

[ Parent ]
These are legitimate questions. (4.00 / 4)
Thanks Chris for getting to the core of the skepticism surrounding Geithner and Summers, at least with respect to AIG.  I submit that similar, and perhaps even more compelling questions could be raised in regards to their dealings with Goldman Sachs, JP Morgan/Chase, Wells Fargo/Wachovia/Countrywide and Citigroup.  But AIG is the question of the day so I leave the others for later analysis and questioning.

As reported by Bloomberg today:

The U.S. risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital, investor Jim Rogers said.

"The U.S. is taking assets from competent people and giving them to incompetent people," said Rogers, chairman of Singapore-based Rogers Holdings and the author of books including "Investment Biker" and "Adventure Capitalist." "That's bad economics."

The U.S. government should let American International Group Inc., whose fourth-quarter loss was the worst in corporate history, go bankrupt, Rogers added in a Bloomberg Television interview today. Congress approved a $700 billion bank bailout package in October, and President Barack Obama's administration has suggested it may need an additional $750 billion.

The U.S. is repeating the mistakes made by Japan in the 1990s and risks creating "zombie banks" by rescuing failed financial services companies that should have been allowed to go under, Rogers said.

New York-based AIG has received $173 billion in government aid, and had earmarked $1 billion in retention pay for about 4,600 of the company's 116,000 employees so they won't leave.

The Treasury this week intends to provide more information about a $1 trillion plan to remove distressed mortgage assets from banks' balance sheets. The Federal Reserve is also scheduled this week to start the first phase of a $1 trillion program to revive the market for securities backed by consumer and business loans.

There is a lot going on here and an awful lot is at stake, especially for US citizens and taxpayers.  It would be very comforting to know that our elected President and the key appointments to his cabinet, have the average Americans interest at heart.  And if they do, then they owe us a detailed explanation as to how their policy decisions advance that notion.

"We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." - SCOTUS Justice Louis Brandeis

Not to be incendiary or anything (4.00 / 4)
But now that Congressional Dems are throwing around ideas like "tax 95% of this bonus money," can we actually make it "95% of all the money these fuckers ever got paid" and build a better America with the cash they stole from us?

I mean, honestly.  They should be paying to clean this up.  

Geithner (4.00 / 2)
On Obermann tonight jonathan Turley said he didn't think it was legally possible to "TAX" the money back. He also said people are rightly pissed at the double standard between the UAW and banks!
There will be a BIG decline in Obama's approval rating unless he fires his bank cosy economic team! Everyone that comes in my store is PISSED! The public have had it with wall street and execs lining their pockets.
Congress needs to get in front of this regardless of Obama!
Their will be a backlash!

Totally. (4.00 / 2)
Does anyone else remember Reagan's "Welfare Queen" who was living large on $150,000 of tax money?  Stack that myth against the very real millions which these sharks are's going to get ugly.

[ Parent ]
Well, then publish their names and addresses (0.00 / 0)
The tax-payers will get their money back, one way or another.

"It sounds wrong...
     ...but its right."

[ Parent ]
Suck it up (4.00 / 4)
For all those who don't get why this is such a volatile issue, let me lay it out for you.

When the manufacturing jobs were shoved out of the country in the eighties, people were told to suck it up, retrain themselves and stop whining.

When the high-tech jobs that were supposed to replace the manufacturing jobs that were lost in the eighties were themselves sent overseas in the late nineties and this decade, people were told to suck it up, and retrain.

The American people have been sucking it up for twenty-five years.  The geniuses who told us that this was the way to a bright future enriched themselves while doing so and began to think this their due.

Sorry, that bill is now due.  It's the Masters of the Universe' turn to suck it up now since they were the ones who fucked it up.  The American people are saying that the Masters of the Universe cannot remain Masters of the Universe any longer.  They need to suck it up and learn the humility that they forced the rest of the population to learn these last twenty-five years.

The sound you hear is the sound of a new ethic being born.  The shameless flouting of wealth that was tolerated when most (but not all) boats were afloat will not be tolerated any more.  Democrats are rushing to stay ahead of this wave and they must do so, no matter what their druthers are.

Here's a true story I'll tell on myself.  I happened to see a news item on the web last week that said that Morningstar had just rated the stock of the company I work for at five stars.  I thought that was ridiculous and made what I thought was a wry ironic point about it.  My boss cut me dead, saying "I don't believe any of those scumbags any more."  Three months ago he would have been all over something like that.  And I thought I was the leftist.  

Last week's agenda isn't flying this week.  Open Left's job is to help move this forward as constructively as possible.  If Obama defies this mood he risks his entire Presidency.  He hasn't been inspiring on this, but that is not the point.  The point is how we take our country back.  Obama can be part of the solution or he can be part of the problem.  We don't have time to evaluate him.  The time for that comes later.  Our job now is to build this change.

sTiVo's rule: Just because YOU "wouldn't put it past 'em" doesn't prove that THEY did it.

there's got to be more (2.67 / 3)
One of your mistakes is to think that these bonuses are the only outrage out there. There are no doubt dozens more outrages buried in the various bailouts yet to be revealed, and very little evidence that the administration intends to or is even able to get ahead of them. Hard to get good staff work done when you have no staff. It may be that the bonus numbers are so small compared to the problems Obama, Geithner and Summers are dealing with that they lost sight of how deeply they symbolize the corruption of the system Obama is working to preserve.

Taking issues head on is not the Obama way. He prefers to push them off, spread the responsibility around, get some consensus, and go with the half-solution that comes out of that process. I'm not sure what it will take to change his mode of operation, but this approach is putting his political future in serious jeopardy.  


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