One of the issues in the AIG bonuses is what did the administration know and when did they know it. The NYT tells readers that: "On Tuesday last week, as he prepared for a meeting in London of the finance ministers of the Group of 20 nations, Mr. Geithner learned that A.I.G. by Sunday would send out the bonuses to employees at its financial products unit, which developed the risky derivatives now blamed for the global credit crisis." It's impressive that the New York Times knows when Mr. Geithner "learned" this information. Did this information come to the NYT directly from God? We get a bit more insight on the source in the next paragraph where we find out that: "With few senior political appointees on hand, the word came from one of the numerous career civil servants who keep the Treasury functioning through changes of administration, according to an official (emphasis added)." Perhaps this same "official" is the person who also told the NYT when Geithner learned of the AIG bonuses and provided the article's unsourced description of subsequent events. It would have been helpful to have some additional information on this unnamed official since it is possible that this person has a stake in minimizing Geithner's knowledge of the AIG bonuses. The facts presented in the article lend themselves to an alternative explanation of events.The article tells reports that: "once A.I.G. was under the Fed’s control, its executive compensation plans hardly came up, according to officials," noting that Geithner was overseeing the takeover. One may reasonably conclude that Geithner, as head of the New York Fed, had a good understanding of the sort of compensation packages that were used at financial institutions like AIG. It is also reasonable to assume that if he didn't explicitly take steps to change these practices following the Fed's takeover of AIG, that the practices would still be in place. In other words, insofar as he gave the matter any thought at all, it is reasonable to assume that Geithner knew that AIG would be paying large bonuses to most-valued employees. If he did not give it any thought then it was because he did not care that a firm receiving more $160 billion worth of taxpayer dollars was paying multi-million dollar bonuses to its top executives. It is implausible on its face that Geithner was surprised by this situation.
--Dean Baker
