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