AIG Bonus Mess Adds To Geithner's Rough Stretch

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It's been a tough week for Timothy Geithner. President Obama's Treasury secretary has been a target of criticism in the AIG bonus controversy. Several Republican members of Congress are calling for his resignation, and even some Democrats are beginning to express concern about his future.

Geithner has gotten off to a rough start as the administration's top economic official. First, there were the personal tax issues that held up his appointment. Then he was criticized for unveiling a bank stabilization plan that lacked any details on how to deal with the toxic assets at the heart of the financial crisis.

And now, Geithner is ensnared in the AIG bonus mess. Members of Congress are asking when he first knew about the bonuses and why he didn't do more to stop them.

While several Republican back-benchers in the House have called for his resignation, House Republican Leader John Boehner of Ohio doesn't go quite that far.

"I think the Treasury secretary is on thin ice, and the sooner we get answers to the questions we have posed, the better off he might be as well," Boehner said.

One of the things Republicans are focusing on is a last-minute change to an amendment on executive pay in the stimulus package. The change kept the restrictions on pay from being applied retroactively, meaning they didn't apply to the AIG bonuses. Geithner has acknowledged that Treasury officials were involved in discussions that led to that change.

On Wednesday, as he prepared to leave for the West Coast, Obama rose to Geithner's defense.

"I have complete confidence in Tim Geithner and my entire economic team," the president said. "Understand, as I said before, Tim Geithner didn't draft these contracts with AIG. There has never been a secretary of the Treasury, except maybe Alexander Hamilton right after the Revolutionary War, who's had to deal with the multiplicity of issues that Secretary Geithner's having to deal with, all at the same time."

The president went on to say Geithner is making all the right moves on the economy after being dealt a bad hand. But while he may not have written the bonus contracts, as the president said, Geithner played a big role in designing the AIG rescue in his previous job as head of the New York Federal Reserve Bank.

Robert Reich, who was the secretary of labor during the Clinton administration, says Geithner may be vulnerable, although he doesn't think the Treasury secretary is in a huge amount of trouble. But Reich said he's hearing from Democrats who are expressing concern.

"I get calls, people say, you know, 'Who should be Geithner's replacement if he should be replaced?' or 'Don't you think he's really a liability? Isn't he screwing up this or screwing up that?' " Reich said. "I've been through this so many times before. … Washington thrives on a kind of 'who's up, who's down' gossip."

Still, Reich said, Geithner is the easiest target in the administration for critics of the AIG bonuses.

"Because, obviously, if he did not know, as he says he did not know, then why didn't he know? I mean, the government is essentially the owner of AIG and should be running AIG," Reich said. "On the other hand, if he did know, why did he let it slip so long and so far?"

Edward Liddy, AIG's CEO, acknowledged before a congressional committee Wednesday that he had not talked to Geithner about the bonuses until last week. In further defense of Geither, Reich said the number of huge issues he's juggling makes it understandable that the bonus issue could fall through the cracks. That's especially the case because delays in vetting appointees have kept Geithner very short-staffed at the Treasury.

Nevertheless, Reich acknowledged, when a president is forced to express full confidence in a Cabinet secretary, the red flags go up in the nation's Capitol.



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