THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Joan Vennochi

Obama's blind faith in Geithner

By Joan Vennochi
March 26, 2009
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BEING SLOW to anger is fine. Being slow to honesty is not.

President Obama got frosty during Tuesday night's press conference when asked about the bonuses paid to employees of American International Group, the failed company that received an $180 billion taxpayer bailout. He said he needed time to get angry "because I like to know what I'm talking about before I speak."

When Obama finally got mad, he got mad at Wall Street. But he knows who else deserves the cold shoulder. The list of bonus conspirators includes his own economic team, which is headed by Treasury Secretary Timothy Geithner.

The controversial AIG contracts, which provide for so-called retention bonuses, were written in March 2008. A year later, after taxpayers became 80 percent owners of AIG, the bonuses were protected by Connecticut Senator Christopher Dodd, via a special provision inserted into the federal stimulus bill.

Dodd said he did it because Geithner's Treasury Department asked him to do it.

Geithner said his staff did it and he did not know "the full extent" of the bonus payments until March 10 - an assertion that defies logic.

Reporting by The Wall Street Journal and The New York Times establishes the following chronology:

AIG cited the bonus retention plan in a public filing in early November. Geithner, then president of the Federal Reserve Bank of New York, was involved in major AIG matters until he recused himself around the time of his Nov. 24 nomination as Treasury secretary.

Some lawmakers raised the matter of AIG bonuses at a December hearing. Over the next weeks, AIG officials briefed lawmakers about the retention bonuses. On Feb. 28, Treasury Department staff were briefed on AIG matters, including the bonuses, by the New York Federal Reserve Bank.

On March 3, Geithner was asked directly about the bonuses at a House Ways and Means Committee hearing.

During that hearing, Representative Joseph Crowley, a Democrat from New York, asked what could be done to stop AIG from paying $160 million in bonuses.

Geithner responded by saying executive pay in the financial industry had gotten "out of whack" in recent years. He promised to do something about it when companies getting taxpayer bailouts were involved.

The bonuses were front-page news on March 15. Geithner eventually said he would take "full responsibility" but insisted he did not learn of the bonuses until March 10. A Treasury Department spokesman later said Geithner "was not aware of the timing or full extent of the contractual retention payments or other bonus programs until his staff brought them to his attention on March 10." It took until March 20 for Geithner to confirm that his department pushed Dodd to write the budget loophole into the economic stimulus plan.

The president has made it clear Geithner is his guy. What he has never made clear to the American public is why.

Obama stood behind Geithner when his then-nominee said he didn't pay his taxes because of some misunderstanding of the tax code. Now Obama is standing behind Geithner when he says he didn't know about the AIG bonuses because he didn't fully understand what his staff was negotiating.

The president is now asking American taxpayers to trust Geithner's plan to help buy up so-called toxic assets, as well as to expand the government's authority to take over troubled corporations like AIG.

That's asking for a lot of trust. So far, on a personal level, Geithner has done little to show taxpayers he deserves it. But Obama continues to praise him, and even said in a "60 Minutes" interview that he would reject Geithner's resignation, if offered.

A market rally boosts Geithner's stock when it comes to pleasing Wall Street. But it shouldn't erase the honesty question for Main Street.

A Treasury secretary who trims the truth on any level is a liability. But Obama is sticking with his investment, out of loyalty, stubbornness, or both.

There has been plenty of time to figure out who knew what about the AIG bonus formula and when they knew it. If the full calculation doesn't get Obama angry, it should.

Joan Vennochi can be reached at vennochi@globe.com.

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