MR. GIBBS: Jake.
Q Did you guys first find out about these bonuses last week?
MR. GIBBS: I think that’s true, based on what I read in the newspaper.
I certainly hope this isn’t true, because it means they gave AIG $30 billion of taxpayer money on March 1 without any idea what they needed it for, or how they planned to spend it.
Q But you gave money to AIG two or three weeks ago. How could you not know that they have these millions, hundreds of millions of dollars –
MR. GIBBS: Well, again, Jake, there’s — according to news reports, there’s existing contracts, some of which the President — of which the President has asked the Secretary to examine, going forward. I think you also heard the President speak today about having a resolution authority that gives the government and taxpayers far more flexibility in dealing with the disposition of AIG in a way that gives taxpayers protection and flexibility; a disposition that we don’t currently have, but steps that we would like to see taken in order to deal with AIG as a whole.
Here’s your flexibility — you don’t cut the damn check.
Q But why didn’t you attach it to the $30 billion you gave a couple weeks ago?
MR. GIBBS: Again, Jake, the –
Q You’re looking to retroactively attach it to this new $30 billion.
MR. GIBBS: Well, they’re looking through contracts to see what can be done to wrest these bonuses from their recipients.
You own 80% of the company. If you don’t write the new check, AIG goes under and nobody has a job. People become remarkably amenable to rewriting their employment agreements at that point, even the "best" ones who created the crisis. As an aside, why anyone in the Financial Products division is still employed is a mystery that defies any business theory I’m familiar with.
Q No, I’m sorry, I don’t think — I don’t understand, so maybe I’m just not understanding. But President Obama said in early February when he gave the speech on executive compensation, "These kinds of compensation packages in the midst of this economic crisis isn’t just bad taste, it’s bad strategy, and I will not tolerate it as President. We’re going to be demanding some restraint in exchange for federal aid." Since that time, he gave tens of billions of dollars in federal aid to AIG without demanding restraint.
MR. GIBBS: Well, again, Jake, we’ve got existing relationships, contracts, as I just mentioned, that were negotiated a year ago, assistance that was granted outside of the legal authority prior to the creation of the Troubled Asset Relief Program. The President has asked the administration to go back and look at what remedies are possible to block those bonuses.
Q Well, why didn’t he do that before?
MR. GIBBS: Well, again, the excessive compensation rules that you noted — and I think somebody asked this at the background briefing that we had — obviously are prospective based on some limitations that we have in looking backwards. The President has asked Secretary Geithner and members of the administration to exhaust all legal remedies in looking backwards to see what steps could be taken to block these bonuses.
This is just gibberish. The American Recovery and Reinvestment Act, which the President Obama signed into law on February 17, and which AIG cited as the legal justification for paying these bonuses, "specifically exclude bonuses paid pursuant to pre-February 11, 2009 employment contracts." Was Geithner not aware of this, either?
Q I know, but since — and I’m sorry to belabor this point — but since President Obama gave his speech, you guys gave more money to AIG. Why wasn’t it attached to the new money?
MR. GIBBS: Because it’s — again, it’s part of the -
Q Part of the old contract.
MR. GIBBS: Right. It’s part of –
Q But you’re looking now retroactively to see if you can attach something to that old money?
MR. GIBBS: That’s what we’re looking at.
Q Well, why didn’t you do it at the time, if you’re looking to retroactively do it?
MR. GIBBS: The administration is taking the steps today to go back and see what can be done, as Jeff said, to call those bonuses back.
Q But, Robert, to follow up on Jake’s point, did Secretary Geithner make a mistake by not reviewing these contracts — they’re a year old — before he cut a new check to AIG? Why didn’t he do that?
MR. GIBBS: I would certainly ask the Treasury — I’ll ask the Treasury that. But again, to some degree, there are legal instruments and contracts that predate this administration, that predate the legal founding of the TARP program. The President has asked this administration to exhaust all legal avenues to see what can and should be done going backwards.
Best case scenario here, Gibbs is asking us to believe that Geithner was not aware of the law that the President signed on February 17 limiting executive compensation for TARP recipients that could have restricted the AIG bonuses but didn’t, was not aware of what AIG intended to use the March 1 $30 billion for, and was not aware that $1.2 billion in 2009 executive bonus commitments even existed before this week. Then he enters into a deal with AIG to reduce those bonuses by a mere $4.8 million, calls it a day, and now agrees with the President that the deal he cut sucks. No mention of the $1 billion in executive bonuses AIG still plans to pay out this year, or what anybody plans to do about it.
And, based on what Gibbs is saying, that’s the best scenario I can come up with. It goes downhill from there.