Massimo Calabresi has a biggish story today reporting that though Tim Geithner said that he only learned of the AIG bonuses on March, 10th, Federal Reserve officials has informed Treasury Department staffers of their existence on February 28th. And if that bit of inter-department backstabbing wasn't juicy enough, Justin Fox notes that the bonuses were actually reported in the press, complete with outraged quotes from congressmen, on January 27th.Start the countdown till some columnist titles a devastating piece, "What did Tim Geithner know and when did he know it?"But given the information Geithner had available, it's hard to argue that he should have stopped the bonuses. The AIG retention payments were one-tenth of one percent of the money we've given AIG, much less the rest of the system. Whether Geithner knew of them early or late, he probably didn't consider them a priority. If someone had sat him down and explained that the bonuses would become the flashpoint for populist outrage and imperil the whole of the administration's response to the financial crisis, that might have changed matters. But that sort of thing is hard to predict that in advance: There have almost certainly been a thousand outrageous provisions and outcomes on the level of the AIG bonuses. If Geithner were of a preventive mindset, he could expend so much effort putting out potential political brushfires that he'd have no time to actually deal with the inferno consuming the banking system.Indeed, the argument here is not that he should have seen the bonuses coming so much as he should have seen the response to them coming. And on some level, I'd actually prefer that the Treasury Secretary wasn't dropping work on the banking plan to focus on the possible political implications of ongoing compensation proceedings. That obviously won't be true going forward, but it's not clear that that's a good thing.Update: I should have read Noam Scheiber earlier this morning. Curses! SHOULD TIM GEITHNER HAVE STOPPED THE BONUSES?
Massimo Calabresi has a biggish story today reporting that though Tim Geithner said that he only learned of the AIG bonuses on March, 10th, Federal Reserve officials has informed Treasury Department staffers of their existence on February 28th. And if that bit of inter-department backstabbing wasn't juicy enough, Justin Fox notes that the bonuses were actually reported in the press, complete with outraged quotes from congressmen, on January 27th.Start the countdown till some columnist titles a devastating piece, "What did Tim Geithner know and when did he know it?"But given the information Geithner had available, it's hard to argue that he should have stopped the bonuses. The AIG retention payments were one-tenth of one percent of the money we've given AIG, much less the rest of the system. Whether Geithner knew of them early or late, he probably didn't consider them a priority. If someone had sat him down and explained that the bonuses would become the flashpoint for populist outrage and imperil the whole of the administration's response to the financial crisis, that might have changed matters. But that sort of thing is hard to predict that in advance: There have almost certainly been a thousand outrageous provisions and outcomes on the level of the AIG bonuses. If Geithner were of a preventive mindset, he could expend so much effort putting out potential political brushfires that he'd have no time to actually deal with the inferno consuming the banking system.Indeed, the argument here is not that he should have seen the bonuses coming so much as he should have seen the response to them coming. And on some level, I'd actually prefer that the Treasury Secretary wasn't dropping work on the banking plan to focus on the possible political implications of ongoing compensation proceedings. That obviously won't be true going forward, but it's not clear that that's a good thing.Update: I should have read Noam Scheiber earlier this morning. Curses! 
