This diary's title says it all.
The details are best found in this piece Earl Ofari Hutchinson found in today's Huffington Post.
If you don't feel like reading it, the bare, undisputed, indisputable and grim facts that constitute the smoking gun are after the fold:
AIG had declared its intention to pay the retention bonuses in its September financial filings with the SEC.
Then the story unfolds thus:
November 2008. Treasury and Fed officials negotiated the specific terms under which the bonuses could be paid. This even included cuts in bonuses for most of the AIG's top executives.
December 2008. Congressional Democrats attempted to hold hearings on the bonuses. Several House Democratic Reps went further. South Carolina House Rep Elijah Cummings specifically demanded that newly appointed AIG CEO Edward Liddy scale back the bonuses. Another House rep. publicly called for the resignation of Liddy.
February 2009. Geithner and top Obama team economic advisor Larry Summers pressure Connecticut Senator Christopher Dodd and other Senate lawmakers to excise a provision from the banking bailout legislation that bans excessive executive bonuses to executives at TARP funded companies before February 11.
February 2009. Treasury staffers publicly disclose that the Treasury, the Federal Reserve in Washington, and the New York Federal Reserve held continuous interagency discussions on all operations of AIG since September. Geithner headed the New York Fed during those months.
February 2009. New York Fed officials reiterated that they carried out direct oversight of AIG and that they knew all about the bonus payments.
March 3, 2009. In an open hearing before the House Ways and Means Committee, Geithner complains to New York Rep Joseph Crowley that executive bonuses have gotten out of "whack." He was referring specifically to the tainted AIG bonuses.
March 18, 2009. A Treasury spokesperson insists that Geithner did not know about the timing of the AIG bonuses. That's far different than saying that he did not know about them at all as Geithner insisted, and apparently continues to insist despite the smoking gun proof to the contrary.
Verifiable facts are very hard to dispute. Geithner has a problem and that problem is now Obama's.
This is the narrative that is emerging:
- Geithner knew about the bonuses. So did everybody else that cared enough to know. That's not the problem.
- Geithner tried to PROTECT the bonuses. Indeed, when Sen. Chris Dodd tried to insert language in the stimulus bill that would stop the bonuses, Geithner or his people inserted a tailor-made exemption (the now famous pre-existing contracts exemption).
- Geithner's outrage is pure hypocrisy. Geithner's feigning ignorance is a pure lie and the administration saying that American's don't care about the AIG bonuses (Axelrod, that's you) is a pathetic attempt at changing the subject.
Why on earth did Geithner try to protect the bonuses? Many theories have been advanced (Geithner close to Wall-Sreet, shares their views, lacks ability to perceive public outcry on account of this etc.)
There could be truth in that but a simpler explanation was that Geithner wanted to make his own life easier. Think about it: he doesn't need law-suits against the government for unpaid wages and he does need AIG staff to be motivated enough to clean up their f*cking mess.
So what to do now? Obama is spending his political capital expressing confidence in Geithner when he uses this same capital in order to advance his progressive agenda.
Firing him is also expensive in terms of political capital because it reflects badly on Obama's ability to pick his staff correctly (a meme that does not need any further reinforcement).
This is the best outcome IMHO: Geithner must tender his resignation (to show remorse) and Obama must refuse it. This way Obama would be showing magnanimity while making it clear that the economy represents challenges much tougher than the AIG bonuses. This would make the narrative die.