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How the Fed Failed to Tell Obama About The Bonuses
He confronted Liddy over the phone March 11, demanding that he renegotiate the bonus contracts. Some minor changes were made, but the bulk of the bonuses were paid. Company and Treasury officials say they will seek changes to bonuses promised for work done this year.
Obama learned of the bonuses March 12, the day before they were paid out, from Axelrod, whom Geithner had briefed on the situation. The president was "aggravated" and "a little bit disbelieving," Axelrod said in an interview yesterday.
For the new administration, the bonuses were a distraction from what senior aides called the main focus: getting the economy working and people back to work. "People are not sitting around their kitchen tables thinking about AIG," Axelrod said. "They are thinking about their own jobs."
Obama's top economic aides -- including Geithner -- sought to identify any recourse. The task was made more difficult Friday, when millions of dollars were disbursed. Their message to the president when the group assembled for their first extended conversation about AIG in the Roosevelt Room on Sunday was not optimistic: They told him they had "done and will do what we legally can," Axelrod said.
But Obama made clear at that meeting that he was unwilling to throw up his hands. He instructed Geithner and the others to seek legal ways that the government might recover the bonuses. And he made plans to tell the public what he thought the next day.
That decision ran counter to the belief among some in his inner circle that the bonus issue while an outrage was a small problem compared with the economic issues confronting his young presidency. "The first and most important job we have is to get this economy moving again," Axelrod said. "As galling as this is, it doesn't go to the main issue."
Over the following days, Obama came out swinging, denouncing the bonuses while expressing "complete confidence" in Geithner. Yesterday, he continued the effort, saying that "I don't want to quell anger. I think people are right to be angry. I'm angry."