Blame is falling on Treasury Secretary Tim Geithner for the AIG bonus mess to the point where President Obama was forced again today to defend his Treasury Secretary. With the WSJ reporting that it was Geithner who told Chris Dodd to remove a provision blocking the bonuses from the stimulus bill, are Geithner’s days numbered at Treasury?
While everyone is focused on discovering which member of the conference committee removed the AIG bonus blocking provision, and I think it a pretty safe bet that it was Sen. Banking Industry Chris Dodd, I doubt that he did this on his own. The Wall Street Journal reported yesterday that it was Tim Geithner and Lawrence Summers, “The administration is concerned the rules will prompt a wave of banks to return the government’s money and forgo future assistance, undermining the aid program’s effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.”
If the WSJ is to be believed, taking into account their own political agenda, their scenario makes sense. Dodd is already under fire for his special mortgages and very close relationship to the banking industry that he is supposed to be helping oversee, but the senator is also facing a very difficult reelection battle next year. I doubt that Dodd would unilaterally make a move that could amount to career suicide without having some political cover, but one never knows when it comes to Chris Dodd and the banking industry.
Treasury Secretary Geithner has already been criticized for his weak performance to the point where defending him has become a daily part of the White House routine. Obama said today that he has “complete confidence” in Geithner. Obama also said that Geithner is, “making all the right moves in playing a bad hand.” If it is eventually uncovered that Geithner and Summers were behind the removal of the AIG bonus provision from the bill, both of them could be leaving the administration.
I think it is much too early to call Geithner’s time at Treasury a complete disaster, but his early performance has been poor. Obama’s comments in support of Geithner could become his equivalent of George W. Bush’s heck of a job Brownie praise to FEMA after Hurricane Katrina. On the other hand, if it is revealed that Chris Dodd acted on his own to let the AIG bonuses go through, then he can pretty much forget about winning reelection. Either way some heads are going to roll over this. The only question is whose head will it be?