On Saturday the Washington Post reported that the administration was doling out federal bailout money via “special purpose vehicles” to help banks skirt restrictions on the funds imposed by Congress — including, naturally, limitations on executive pay. In a move a former Justice Department attorney equated to “money laundering,” the story further specified that the White House had concluded that the conditions ought not to apply in “at least three out of five initiatives funded by the rescue package.”
The story quoted Treasury spokesman Andrew Williams defending the strategy, and on Sunday senior Obama adviser David Axelrod, despite his reported distaste for Treasury’s lenience on the banks, went on Fox News Sunday and towed the Treasury line when Chris Wallace brought up the report.
But a bit later the same morning on Face the Nation the policy seemed to have changed — if you believed Treasury Secretary Tim Geithner’s unequivocal denial to CBS’s Bob Schieffer that any such plan compensation-restriction avoidance plan existed:
Transcripts after the jump:Here’s Axelrod on Fox News Sunday:
WALLACE: Mr. Axelrod, we’re running out of time, so I’m going to try to invoke the lightning round rules, with quick questions and quick answers.
First of all, there’s a report that the Obama administration is structuring its new bailout initiatives to allow companies that participate to get around congressional limits on executive compensation.
When taxpayers are putting up most of the money and taking more of the risk, why would the Obama administration allow some of these executives to get even richer?
AXELROD: Chris, understand that we are — we are very committed — the president has a tough set of standards that we are refining to deal with this question of executive compensation. It’s an issue he’s talked about long before this crisis.
But here’s the point. On some of these programs, we’re asking financial companies to come in and help solve this problem by providing more lending, by buying up toxic assets and so on. We don’t want to create disincentives and undermine the program.
So we have to look very closely at this, making sure that we’re not rewarding people for irresponsibility, that people — that firms that get extraordinary help aren’t getting — aren’t giving out huge bonuses.
But we do need these financial companies to help — who aren’t in great distress to help lead us out of this and partner with taxpayers to get lending going again.
And Geithner on Face The Nation:
SCHIEFFER: Let me ask you about one more thing. As Will Rogers once said, all I know about this is what I read in the newspapers. But the Washington Post has reported that even after all the outrage about the bonuses at AIG, that the Treasury Department is working out an arrangement now to set up new some sort of entity where they can funnel money to this entity and then it can give the money to these companies and banks that need help. And in doing that, it allows the banks and their executives to
evade and go around limits that had been placed on executive compensation by the Congress. Is that right?
GEITHNER: No, that’s not true, Bob. Now, our obligation is to apply the laws that Congress just passed on executive comp, and we’re going to do that.
Now, we’re also going to make sure these programs are as effective as possible in making credit more available to businesses and families across the country. Now, the way the legislative process works is Congress legislates. We have an obligation then to design and put out regulations for applying that. We’ll put those out in draft. The American people have the chance to evaluate those and assess and comment on those. We’re working with Congress as we do this. And — but again, our obligation is to apply those laws, and we’re going to do that because it is very important to us that every dollar of assistance we provide doesn’t — goes to expand lending.
SCHIEFFER: But are you saying to me — and we’ll close with this — that every limit that Congress has put on executive compensation, that you’re going to see that that’s enforced and that these — there’s not going to be a way to get around that?
GEITHNER: Absolutely, because we want the American taxpayers — this is going to generate greater lending, not providing excess compensation.
It’s unclear what’s behind the seeming contradiction beyond the deepening concern on both sides of the debate that the administration’s plans to restore health to the financial system will be altogether ineffectual. But neither side of the debate — as Republican congressman Dana Rohrbacher’s frenzied Twittering on the issue can attest — sees those fears as an excuse to lavish any more multimillion dollar bonuses on zombie bank CEOs.