The New York Timesand Washington Postlead with, and everyone else fronts, the continuing fallout from the $165 million in bonuses that American International Group handed out to employees who were at least partly responsible for the insurance giant’s fall from grace. President Obama ordered his administration to “pursue every legal avenue to block these bonuses” that started to go out Friday. Separately, New York Attorney General Andrew Cuomo said he would subpoena the company to find out details about the bonuses and their recipients.
The Los Angeles Timesleads with a look at how President Obama has “launched an aggressive campaign-style offensive” to garner support for his agenda and make his political opponents seem irrelevant. E-mails are going out to campaign supporters asking them to call members of Congress, and the White House is coordinating with grass-roots groups that are running ads targeting Republicans. Obama will even go on The Tonight Show on Thursday, marking the first time that a sitting president will appear on a late-night talk show. USA Todayleads with a new poll that shows support for the war in Afghanistan has dropped to new lows. About 42 percent of Americans think it was “a mistake” to send troops to Afghanistan, a marked increase from the 30 percent who thought so in February. A mere 38 percent of Americans think the war is going well. The Wall Street Journalleads its world-wide newsbox with news that Mohammad Khatami, Iran’s reformist former president, has decided to drop out of the race. The move might make it more difficult for reformists to stop the re-election of President Mahmoud Ahmadinejad. Khatami dropped out after a reformist rival vowed to stay in the race and the former president said he didn’t want to split the vote.
Coming a day after Obama’s top economic advisers said that they had no choice and had to let the AIG bonuses go through, it’s hard to see how the president’s order to “block these bonuses” was anything besides a little grandstanding. Indeed, the WSJ says that by the end of the day, administration officials had acknowledged that there was nothing they could do to demand the recipients return the payments without getting involved in a legal fight that could very well end up being more expensive than the bonuses themselves. The LAT talks to some legal experts and concludes that at the very least it would be difficult, and might even be illegal, for the government to force employees to return payments that they were entitled to under their contracts.
To get around these legal issues, there are suggestions that the administration would write new conditions to the $30 billion installment of taxpayer money that AIG is set to receive soon. As the NYT points out, this “seemed to leave open the possibility that the company would effectively be repaying taxpayers with taxpayer money.” An administration official obviously denied it, but it’s difficult to see how else the company could give the money back.
Now that the American public seems to have channeled all its rage about the financial collapse into AIG (hey, at least it’s a more worthy victim than Jim Cramer), questions are starting to pop up about who knew and when did they know it. The NYT says officials at the Treasury and Federal Reserve knew about the bonus program “as far back as last fall.” One lawmaker—Rep. Elijah Cummings of Maryland—didn’t get very far when he tried to obtain information about the bonuses in December. But, again according to the NYT, Timothy Geithner, the treasury secretary, didn’t personally know that another round of bonuses was due on March 15 until last week. The WP takes it back even further and says AIG had publicly disclosed its plans for the payments “more than a year ago” and the details had been “widely reported.” The Post also specifies that the Federal Reserve Bank of New York, which has overseen AIG since September, extensively looked into the issue and concluded they couldn’t do anything about the bonuses. For some reason, the paper doesn’t remind readers that Geithner was the president of the Federal Reserve Bank of New York until he joined the Obama administration.
The WSJ points out that the confusing and seemingly haphazard response to what has essentially become a public relations crisis “illustrates the bind that Mr. Obama finds himself in.” While he needs to convince Americans that he shares their anger, he also “needs the executives and employees of those companies to help the government untangle the current financial mess.” Working at AIG now is hardly a picnic. The WP points out that there were armed guards outside the insurance giant’s Financial Products division offices in Connecticut, where employees were swamped with angry phone calls and e-mails, including a few death threats. Some managers resigned, and others just didn’t show up to work. “It’s a mob effect,” one senior executive said. “It’s putting people’s lives in danger.”
We all need to calm down, suggests the NYT’s Andrew Ross Sorkin. Giving out $165 million to the people “that nearly took down the financial system” doesn’t seem to fit anyone’s definition of fair but perhaps we should all just “swallow hard and pay up.” Although it may seem like a cop out to say that contracts can’t be broken, just imagine what could happen to the economy “if the business community started to worry that the government would start abrogating contracts left and right.” Even if we set aside the issue of contracts, there’s the uncomfortable fact that since “AIG built this bomb … it may be the only outfit that really knows how to defuse it.” AIG’s employees know where the skeletons are buried and could move to another company to make money betting against taxpayers’ interests. It might be tempting to think that’s not really an option because there are no jobs in Wall Street, but the truth is that “the real moneymakers in finance always have a place to go.”
While we’re at it, we should all ease up a bit on the attacks on banks that took bailout money and have the audacity to still hold staff retreats or sponsor events, writes the WP’s Allan Sloan. “Sure, it makes for great sound bites,” writes Sloan. “But it’s counterproductive, because it will cost taxpayers money and make reviving our financial system more difficult.” Sloan isn’t talking about the AIG bonuses or Citigroup’s plans to buy expensive private planes, which are true symbols of corporate excess. But rather, trips to reward employees or Northern Trust’s much-maligned sponsorship of a golf tournament. All this scrutiny has motivated some banks to say they want to return government money ASAP. That attitude may be easy to mock, but it could end up costing taxpayers money. Furthermore, if healthy institutions return the money it would stigmatize the institutions that can’t pay back the government. If lawmakers want to micromanage the companies, they should just take them over. “Until then, they should stop acting like children throwing spitballs.”
Criticizing companies for their profligate ways is a lot like criticizing earmarks: way too easy. The WP fronts a look at one of the most maligned earmarks in the recently passed omnibus spending bill, which involved $1 million to kill Mormon crickets. (“Is that the species of cricket or a game played by the brits?” quipped Sen. John McCain on Twitter.) But the issue is far from a joke for the ranchers of Grouse Creek, Utah, who have been suffering through an invasion of the critters that have “devoured crops, frightened children and threatened families’ livelihoods.” Of course, many say that the problem with earmarks isn’t the projects that they fund, but rather how it’s all done in secret and that it could be used as an expensive thank-you note to campaign contributors.
The LAT points out that demand for hybrids has plunged just as automakers are releasing more of the fuel-efficient cars than ever before. It’s hardly a secret that the whole auto industry is doing badly, but hybrids are particularly difficult to get off the sales floor because consumers are reluctant to pay a premium for fuel-efficiency when the average price of gasoline has dropped below $2 a gallon. Automakers, however, feel as though they have no choice but to keep producing these types of vehicles because of pressure from Washington. “The automakers are in the situation of needing to pacify politicians that are in the position to bail them out with expensive fuel-efficient cars,” an analyst said.
The papers report that Israeli Prime Minister-designate Benjamin Netanyahu has reached a deal with nationalist party Yisrael Beitenu to join his government in exchange for a few important Cabinet seats. If finalized, the deal could mean that the controversial leader of Yisrael Beitenu, Avigdor Lieberman, could become Israel’s next foreign minister. During the campaign, Lieberman won over hard-line voters with a promise to mandate that all Israeli citizens must take a loyalty oath. The agreement doesn’t mention a loyalty oath but also has no mention of peace talks or a peace process. But it does pledge to topple Hamas and vow that the government won’t negotiate with terrorist groups.
In the NYT’s op-ed page, Patrick French writes that the decision by the Pakistani government to hand power over the Swat Valley to the “Pakistani Taliban” was a “foolish bargain” that “represents the most serious blow to the country’s territorial integrity since the civil war of 1971.” The once-popular tourist destination that is merely 100 miles from Islamabad “is not one of Pakistan’s wild border areas” but has now ostensibly become a terrorist sanctuary. The situation is similar to what happened in Afghanistan in the 1990s, when the government slowly allowed the Taliban to take over. Pakistan’s politicians must “recognize the real and immediate danger of the Islamist threat,” writes French. “If they do not, their country risks becoming a nuclear-armed Afghanistan.”