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Geithner facing anger over AIG

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Renita Jablonski: Anger over the payment of millions in bonuses at American International Group is being pointed at U.S. Treasury Secretary Tim Geithner this morning. Richard Shelby, the top Republican on the Senate Banking Committee, stopped short of calling for Geithner’s resignation during an interview with The Early Show on CBS:

Richard Shelby: Where was the Secretary of the Treasury, where was Treasury, before this money was paid out? A lot of money — $165 million — a lot more supposed to be paid out in the future.

AIG has received more than $170 billion in government rescue money.

We’re joined now by University of Maryland Economist Peter Morici. Professor, you’ve been critical of the Treasury Secretary as well. Why?

Peter Morici: Bonuses have been a repeated problem published in The Wall Street Journal. In successive bailouts at AIG, something should have been put in place to basically bring these traders into line with everyone else.

Jablonski: Was there willingness to negotiate?

Morici: We have no idea, because Timothy Geithner didn’t ask them to do that.

Jablonski: How are you certain the Treasury Secretary did not attempt to negotiate with AIG on these bonuses?

Morici: Well no one can be certain of that. However he doesn’t need to negotiate, he could have imposed it. Quite frankly, the federal government imposed the renegotiation of the labor contracts at General Motors and Chrysler, and it could have imposed it at AIG. It was employment contracts in both places. You know, it’s up to Secretary Geithner to defend his conduct.

Jablonski: And at this point, have you heard what you want to hear?

Morici: No, we haven’t. He hasn’t defended his conduct adequately. All we hear from the administration is they’re going to try to do something about it now that the milk is spilled.

Jablonski: And to be fair, AIG was initially bailed out under a previous administration.

Morici: But Timothy Geithner was president of the New York Federal Reserve and part of the team that put in place the bailout. He was very instrumental in the bailout of AIG and of Citigroup. That is why he’s in the job — we wanted continuity, according to the president.

Jablonski: Peter Morici, economist at the University of Maryland. Thank you.

Morici: You’re welcome.

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