Wall Street rescue plan needs rescuing
TEXT OF COMMENTARY
Steve Chiotakis: And then there's the AIG bailout bonuses. The outrage just keeps pouring in. There's a hearing today on Capitol Hill where the company chairman, Edward Liddy, will testify about what's going on. While Liddy inherited the bonus plan, and himself called it "distasteful," he's likely to face the scorn of lawmakers. This morning, we hear from commentator Robert Reich, who says there are other, more troubling aspects to this story.
Robert Reich: The real scandal of AIG, recipient of $170 billion taxpayer dollars so far, isn't just that the firm plans to give giant bonuses to its executives. It's that even though the public now owns 80 percent of AIG, Tim Geithner, the Treasury Secretary, didn't even know of this bonus plan until last week, and seems helpless to stop it. Despite the fact that the plan runs directly counter to administration promises that taxpayer money will no longer be used for Wall Street bonuses.
We've also learned that much of the $170 billion has been used by AIG to pay off counter-parties such as Goldman Sachs, that up until now has claimed it did not receive any bailout money. In fact, the original plan to bail out AIG was concocted at a meeting last fall, run by former Treasury Secretary Hank Paulson, who had been a former CEO of Goldman Sachs -- along with the current CEO of Goldman Sachs, and the then head of the New York Fed, our current Treasury Secretary, Tim Geithner.
Now, none of this would be nearly as awful if the Wall Street bailout were working. But here we are, six months after it began and it's still the case that almost no loans are being made to Main Street. This week, the Fed is launching its own program to get loans to consumers financed by private investors and bypassing Wall Street.
The Wall Street bailout is starting to look like the most expensive tax-supported fiasco in history, and yet it's close to the center of the president's economic recovery program. The public was willing to go along with a large stimulus package, but it won't go along with a second stimulus, and certainly not another bank bailout.
And until the public feels confident that taxpayer money isn't being thrown down a rat hole, it may balk at other ambitious undertakings, such as health care or education or the environment. So before it can clean up Wall Street or do much of anything else, the administration has to clean up the way it's trying to clean up Wall Street.
Chiotakis: Former Labor Secretary Robert Reich teaches public policy at the University of California at Berkeley.