The sound and fury from the AIG bonus story doesn’t cease. The underwater volcano eruption from Tonga overnight was matched only by the smoke and ash spewing from a House chamber yesterday as members pounded AIG CEO Edward Liddy. It didn’t seem to matter that Liddy came on board only last fall and has a one dollar a year salary.
A few members thanked him for his service, but most blamed him for the bonus controversy. In the midst of all of it, murky timelines of who knew what about the bonuses, when. And a mystery surrounding who finagled language at the last minute during the crafting of the stimulus bill, language that essentially paved the way for AIG to pay the bonuses. (Thanks to CNN’s Dana Bash, we now know Sen. Chris Dodd was responsible for that. At the urging, he says, of the Obama Treasury department.)
The question now: is the outrage over $165 million in bonuses distracting from the hard work under way at the Fed and Treasury to stabilize AIG, and for that matter, the entire financial system? $165 million is, as money manager Stephen Leeb points out, “not even a rounding error” in all the money committed to save the financial system. Economists for months have been telling me there may be more money needed for banks, for AIG, maybe even for more stimulus of some sort. (Japan had 8 or 10 stimulus measures during its long ten years of no growth…)
Has this entire AIG mess killed any political will for more tough choice (and more money for the system) ahead? Further, this must be a huge distraction for the Geithner Treasury department. He still needs to get a full complement of deputies ready, even as he undertakes the toughest environment for a Treasury Secretary in our lifetime.
Meanwhile, for those keeping score: the same Congress that passed a stimulus with language that allowed AIG to pay out the bonuses … now wants to pass a law imposing taxes on those AIG employees who go the bonuses.
As for the work being done by the folks at Treasury and the Fed: the Fed didn’t need Congress or the president’s permission to pump $1.2 trillion into the system by buying up securities, a move that instantly goosed mortgage rates. According to Zillow.com, the 30-year fixed rate for people with good credit fell to 4.68 percent. Translation: The bonus controversy swirls, but the thing that matters today for your money, is what the Fed is doing.