Over the past ten days, as the furor over AIG retention plan bonuses has focused on Sen. Chris Dodd and Secretary of the Treasury Timothy Geithner, the White House has undertaken a PR offensive to protect the highest ranking Obama Administration official who was involved in the House and Senate negotiations over the stimulus bill, in which the AIG waiver language was inserted.
“Right now, you get the feeling this is all about protecting [White House Chief of Staff] Rahm Emanuel,” says a former Treasury Department lawyer, who worked in that department’s counsel’s office on the Troubled Asset Relief Program (TARP) before joining a D.C.-based law firm in February. “At the time, we were led to believe there were basically three or four people from the Administration at the table when the final deals were cut and one of them was Emanuel.”
Informal advisers to Geithner are growing increasingly frustrated, they say, that Geithner is being held up as the straw man for the public anger over the bonuses. “Just over the weekend you saw a new guy added to the target list, [White House economics adviser Larry] Summers,” says a longtime Geithner colleague at the New York Fed. “You have Dodd, Geithner, Summers, but there were other, more senior political people involved in this mess, and their names aren’t being mentioned. Why isn’t anyone asking Rahm Emanuel, ‘What meetings were you in?’ ‘What did you and the President know and when did you know it?’ Tim has some culpability, but he’s not the guy who signed off on the Dodd language. He wasn’t that empowered to do something like that.”
Yesterday, Obama supporter and New York Times columnist Frank Rich fingered Summers as a key player in the AIG bonus mess. “Summers is so tone-deaf that he makes Geithner seem like Bobby Kennedy,” Rich wrote.
Summers currently serves as head of the National Economic Council in the White House, and has been mentioned as someone who might be forced to return to the Secretary of the Treasury post he once held in the Clinton Administration should Geithner not survive the political storm he finds himself in.
It isn’t just Rich, though, who has placed Summers in the center of the controversy. Last week, Sen. Ron Wyden, who was led to believe that language he was inserting into the stimulus bill, which would have heavily taxed such payouts as the retention bonuses, told reporters that it was the “Obama economic team” that stripped his and Sen. Olympia Snowe‘s provision from the bill. When he was asked about who he dealt with during the February negotiations over his language, he said, “Secretary Geithner, Larry Summers, and I’ll leave it at that.” He declined to name other names, though he indicated to reporters present that he was aware of others in the negotiations.
Senior Democrat leadership aides in both the House and Senate, however, insist that both Emanuel and Office of Management and Budget Director Peter Orszag were present at the meetings where the decision was made to strip out the bonus taxation language and insert the Dodd waiver.
Further complicating the situation is that at the time of the negotiations, Geithner had in his possession Treasury Department memorandums outlining November negotiations between the department’s counsel’s office and AIG officials over the very retention bonuses that were preserved in the final bill.
As early as November 5, 2008, AIG lawyers and senior executives and Treasury officials were in negotiations over just which bonuses and retention-plan payouts could and could not take place. “We indicated that UST wants to put in place a limitation on annual bonuses that assure that AIG executives/employees will not be enriched out of TARP funds,” wrote a Treasury official to colleagues involved in the negotiations.
In preparing Geithner for the stimulus negotiations, Treasury staff provided him, as well as Obama Administration officials, detailed memorandums outlining the extensive negotiations the agency had had with AIG, among other financial institutions, about bonus payouts, and recommending steps that could be taken legislatively to at least limit taxpayer exposure.
“[Geithner] had the information,” says the former Treasury lawyer. “What he did with it we don’t know. But our input didn’t seem to make much of a difference in the room when it mattered.”
Neither did Republican input; no Republicans were present in the negotiations in the Speaker’s office. Both Nancy Pelosi and Harry Reid, who served as a conference manager on the bill, barred Republicans from the negotiation table.
And, surprisingly, neither was Chris Dodd, who was not one of the three Senate managers for the conference negotiations.
So the mystery remains: who had final sign-off on the Dodd language insertion on AIG’s retention bonuses? One thing seems certain, Rahm Emanuel isn’t talking, and neither are Pelosi or Reid, who were also in the room with Emanuel, Orszag, and Summers when the final language was worked out.