We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses. As I said last week, that’s the height of irresponsibility. That’s shameful.
Announcing a new executive compensation policy February 4, the White House argued that when public light is shined on bailout-recipient excesses, company behavior changes. Challenged on the lack of rule authority to stop the excesses, Robert Gibbs said that day:
You don't have to have a rule or a regulation to ensure that the American people know what to get mad at. You don't need a regulation to have that transparency and accountability put pressure on the actions of companies and executives that change their actions.
Fast-forward to the AIG firestorm of the previous two days. As the public learned that nine figures of public taxpayer money has headed to bonuses mostly for employees of AIG’s catastrophically dismal Financial Products division, AIG CEO Edward Liddy has replied to Treasury Secretary Geithner that the contractual obligations of employment contracts entered into in 2008 are binding and there’s nothing that can be done.
Obama addressed the issue today:
This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?
In the last six months, AIG has received substantial sums from the U.S. Treasury. And I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole. I want everybody to be clear that Secretary Geithner has been on the case.... But I think Mr. Liddy and certainly everybody involved needs to understand this is not just a matter of dollars and cents. It's about our fundamental values.
Principles expressed? Check.
“Every single legal avenue” means: we don’t have an answer yet. If they had an answer, we’d know it far and wide immediately. Geithner “on the case” – especially since Geithner met with Liddy last week over the issue and Liddy responded with a “too bad, so sad” reply – isn’t a real answer.
Even as New York Attorney General Andrew Cuomo issues subpoenas for lists of who at AIG got bonuses and how much, and even as the House schedules AIG hearings for Wednesday, the White House seems to only have principles and outrage, but few teeth.
This story isn’t over, and the namers still have a shot at winning. We'll certainly hear more this week, because the story is ideal for politicians to pull their own Jon Stewart imitation. But for now, advantage AIG.