In it, but not of it. TPM DC

Centrist GOP Sen. Olympia Snowe (ME), whose support the White House is counting on to pass health reform, the budget, and climate change, offered a warning to President Obama today: Clarify your position on taxing bonuses at bailed-out companies, or risk losing more political capital.

"I think the president has an obligation to address this [and to] explain why he doesn't think this is necessary," Snowe told reporters today, referring to Obama's initial embrace of taxing bonuses -- which was followed days later by a pullback from his advisers amid questions about the measure's constitutionality.

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Frustrated by the recent bonus bonanza Rep. Brad Sherman (D-Calif.) asks for a chart of bonus statistics for all TARP recipients. Geithner demurs. Check it out.

Moments ago, Secretary Geithner artfully dodged a question that's on everybody's mind: What happens if his plan fails. Echoing the architects and supporters of the success-bonanza that is the Iraq war, Geithner said that the only thing we need to ensure the plan works is sufficient will.

Earlier in the hearing, Tim Geithner suggested that Goldman Sachs could be one of five institutions helping to manage the public-private partnership program to buy up a bunch of toxic legacy assets from ailing banks.



Goldman has played a central role in this drama. As an institution, it's been extremely close to the Treasury department. And, as Josh noted, it's also about to pay off all of its TARP money (with the help, perhaps, of the other government money it received as an AIG counterparty) which will free it up to return to a status quo of paying enormous bonuses.

It's also, of course, one of the institutions that helped bring the financial system to its knees--it holds many of the toxic assets in question and may be well placed to bid them up and inflate their prices at auction. (How you manage the fund to rescue financial institutions with toxic assets while you yourself hold those same assets has yet to be sussed out by committee members.)

Anyhow, in the event that you're feeling left out and want a piece of the Goldman pie for yourself, you can apply with the government to be a private asset manager here.

As Brian observed earlier, the big story of this morning's testimony from Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke was their request for broad governmental powers to seize non-bank financial institutions -- effectively paving the way for receivership in case another AIG-sized firm heads for collapse. But House Majority Leader Steny Hoyer (D-MD) isn't prepared to hand over those powers to Treasury without getting more questions answered.

At his weekly briefing with reporters, Hoyer was notably cool to the idea of handing Geithner takeover powers without greater congressional oversight:

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After news of the AIG bonuses broke, Geithner held to the line that they didn't know about the payments until March 10, just a little while before you and I did. And, lo and behold that's what Bernanke is saying now:



Bernanke: I knew that there were general compensation packages throughout the company. I did not know, I was not informed about the specific payments to AIGFP.

Garrett: If you had that information would that have been germane to your discussions?

Bernanke: It would have given us more time to talk, negotiate, and look for options, but frankly we still would have faced the same legal obstacles we are currently facing.


But AIG CEO Edward Liddy greenlighted a round of bonuses of some sort on September 18, at a time when both men were already deeply involved in AIG, and last week he said that Bernanke had known about the payments for three months.

Late Update: Video embedded above.

A new round of opinion polls give a shocking result: People don't like AIG's executive decisions.

In the CBS poll, 50% said they were "angry" about the bonus payments, 38% said they were "bothered," and only 12% said they weren't bothered. As for the firm's official position that they had to pay the bonuses, only 13% bought that story, with 83% saying the company could have found a way out of it. On whether the money should be recovered, 77% want the government to try to get it back, with only 20% against it.

The Gallup poll finds similar numbers: Only 12% are satisfied with the performance of AIG management, and 80% are dissatisfied. When given options of how to get the money back, only 12% say it shouldn't be recovered, while 27% favor asking for it voluntarily, 25% favor a heavy tax, and 26% are for launching legal actions or making the return of the money a condition of any new federal payouts.

In his opening statement, Fed Chairman Ben Bernanke made the case for legislation--soon to be introduced by the administration on the hill--that would create guidelines and authority for the government to take non-bank financial institutions (like, say, Lehman Bros. and AIG) into conservatorship or receivership. Bernanke said:

The decision by the Federal Reserve on September 16, 2008, with the full support of the Treasury, to lend up to $85 billion to AIG should be viewed with this background in mind. At that time, no federal entity could provide capital to stabilize AIG and no federal or state entity outside of a bankruptcy court could wind down AIG. Unfortunately, federal bankruptcy laws do not sufficiently protect the public's strong interest in ensuring the orderly resolution of nondepository financial institutions when a failure would pose substantial systemic risks, which is why I have called on the Congress to develop new emergency resolution procedures. However, the Federal Reserve did have the authority to lend on a fully secured basis, consistent with our emergency lending authority provided by the Congress and our responsibility as central bank to maintain financial stability. We took as collateral for our loan AIG's pledge of a substantial portion of its assets, including its ownership interests in its domestic and foreign insurance subsidiaries. This decision bought time for subsequent actions by the Congress, the Treasury, the Federal Deposit Insurance Corporation, and the Federal Reserve that have avoided further failures of systemically important institutions and have supported improvements in key credit markets.


Geithner said much the same in his own opening statement. That's the line from the administration. What this means for AIG, but also existing banks and other financial institutions is still an open question. Let's see if Geithner or Bernanke or William C. Dudley (President and Chief Executive Officer of the New York Fed, also testifying) tip their hands.

Now this is reassuring. A spokesman for Michele Bachmann told the Star Tribune that the Congresswoman was speaking metaphorically when she said she wanted people to be armed and dangerous" on the issue of energy taxes.

In Bachmann's defense, it was clear from the context of the interview that she meant the public should be armed with information -- she was discussing how she would be handing out literature against cap-and-trade proposals at an upcoming town hall event.

On the other hand, she might have crossed some lines of appropriateness for an elected official when she said: "Thomas Jefferson told us, having a revolution every now and then is a good thing. And the people - we the people - are going to have to fight back hard if we're not going to lose our country."

Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke are testifying before the House Financial Services committee as you read this. We'll be following today's hearing pretty closely, both because we (ahem) value your readership, but also because the hearing's shaping up to be much more interesting than originally anticipated.

Two big stories broke yesterday, both of which Josh wrote about over at the mother ship. Suddenly there's much more at stake than the question of when Geithner knew about the AIG bonuses. There's now also the questions of the extent to which the administration has handed over the shaping of bailout possibility to the bad financial actors themselves, and of the possibility that the administration will seek extraordinary power going forward to seize distressed non-bank financial institutions like hedge funds and investment firms. That could have huge ramifications for the government's power over regular banks, which often own such institutions, and, depending on the scope of the legislation, for much smaller institutions as well.

Stay tuned.

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