Is 'Big Law' Era Over?

From Debra Cassens Weiss at ABA Journal:
Legal blogger David Lat, founding editor of Above the Law, says there may be good reason for lawyers to panic, but they will ultimately survive.
Speaking to law students at the University of California at Berkeley, Lat admitted news of layoffs and other job woes at Above the Law can be anxiety-inducing, according to the Legal Pad blog. But there’s a good reason, he said. “If people are panicked, it’s because there are reasons to panic.”
Lat managed to be “both depressing and extremely jovial at the same time,” according to Legal Pad’s account of his talk. Lat said BigLaw salaries will be decreasing, lockstep promotions are on the way out, and the golden age of the legal profession is likely ending.
Yet the legal profession and lawyers will survive, at least in some form, Lat said. “At the end of the day, lawyers, we are like cockroaches. You can’t kill us.”

The Financial Genius Ponders

Hat Tip: Lucianne.com

Depression Ahead?

From Steven Gjerstad and Vernon L Smith in the Wall Street Journal:
The events of the past 10 years have an eerie similarity to the period leading up to the Great Depression. Total mortgage debt outstanding increased from $9.35 billion in 1920 to $29.44 billion in 1929. In 1920, residential mortgage debt was 10.2% of household wealth; by 1929, it was 27.2% of household wealth.
The Great Depression has been attributed to excessive speculation on Wall Street, especially between the spring of 1927 and the fall of 1929. Had the difficulties of the banking system been caused by losses on brokers' loans for margin purchases in 1929, the results should have been felt in the banks immediately after the stock market crash. But the banking system did not show serious strains until the fall of 1930. . . .
The causes of the Great Depression need more study, but the claims that losses on stock-market speculation and a monetary contraction caused the decline of the banking system both seem inadequate. It appears that both the Great Depression and the current crisis had their origins in excessive consumer debt -- especially mortgage debt -- that was transmitted into the financial sector during a sharp downturn. . . .
Why does one crash cause minimal damage to the financial system, so that the economy can pick itself up quickly, while another crash leaves a devastated financial sector in the wreckage? The hypothesis we propose is that a financial crisis that originates in consumer debt, especially consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system. It appears that we're witnessing the second great consumer debt crash, the end of a massive consumption binge.

Buffett's Bailout Bonanza

From Charles Piller in the Scaramento Bee:
Billionaire investor Warren Buffett has been lauded for his plainspoken denunciation of the greed and foolishness behind the economic crisis. He's pushed the massive federal bailout of imploding banks as the essential response to an "economic Pearl Harbor."
When Buffett speaks, people in high places listen. He's so highly regarded that in a fall debate, both presidential candidates said they'd consider him for Treasury secretary.
A Sacramento Bee examination of regulatory records has found that his extensive holdings in financial firms have made Buffett, the world's second-wealthiest person behind Microsoft Chairman Bill Gates, one of the top beneficiaries of the banking bailout.
Just 28 companies received more than 90 percent of the funds so far disbursed to financial firms by the $700 billion Troubled Asset Relief Program.
Buffett's company, Berkshire Hathaway, hasn't received any of that federal aid, but Berkshire, based in Omaha, Neb., owns stock valued at more than $13 billion in the top recipients of TARP funds, including Goldman Sachs Group, US Bancorp, American Express and Bank of America, which analysts all thought were in deep trouble before TARP was approved in October.
That total, The Bee found, ranks Berkshire fifth among all investors in TARP-assisted companies. Berkshire's TARP holdings constitute 30 percent of its publicly disclosed stock portfolio, and that proportion reflects at least twice as much dependence on bailed-out banks as any other large investor.
Berkshire, for instance, is the largest shareholder in San Francisco-based Wells Fargo, which got $25 billion — 91 percent of the TARP funds invested in institutions headquartered in California.
Buffett increased his bank holdings in September, while he was arguing in the media that Congress should approve the bailout to prevent the collapse of the global financial system.
"If I didn't think the government was going to act, I would not be doing anything this week," Buffett told CNBC after investing $5 billion in Goldman Sachs. "I am, to some extent, betting on the fact that the government will do the rational thing here and act promptly."
The more the bailout props up these financial companies, the more secure Berkshire's and other shareholders' investments in them are. Berkshire shares have risen sharply with the financial sector stock rally in recent weeks, but they're still down nearly 40 percent since September. In Friday trading, they closed at $92,490 a share. . . .
Buffett, whose company is also the largest investor in Goldman Sachs and American Express, declined to be interviewed. In a February letter to Berkshire shareholders, he said that without government intervention, the consequences for the economy would have been "cataclysmic." . . .
Experts agree that preserving a functional banking system, TARP's goal, benefits everyone. In dispute is whether the bailout was the fairest and best approach.
Some say that large shareholders such as Buffett have been the primary, and perhaps only significant beneficiaries of TARP. Bank stocks have recovered significantly in recent weeks — Goldman's share price has more than doubled since November — and no TARP bank has failed.
Critics, however, worry that TARP propped up Wall Street against bankruptcy at the expense of taxpayers. The Treasury Department expected TARP to get loans flowing again, but the market has barely thawed, and unemployment has surged. . . .
When told of The Bee's findings, Robert Kuttner, the author of a recent best-seller on the economic crisis, said they reveal a bailout program designed out of public view, and one that "reeks of favoritism and special treatment."
"TARP was designed that way," Kuttner said, "to concentrate power with almost no effective oversight. That, to me, is the scandal."
The lack of clear criteria for awarding TARP funds continued after the recent change in government, according to Kuttner and other experts.
"The Obama administration said it would offer transparency and openness. But the single most important thing they are doing is being done largely behind closed doors, and the design is by, for and in the interest of large banks, hedge funds and private equity companies," he said. "Because there are no explicit criteria, it's very hard to know if a Citigroup or a Goldman got special treatment."
The Bee's findings follow a recent controversy over some Buffett holdings that may have contributed to the economic crisis.
Berkshire owns more than 20 percent of Moody's, a top credit rating agency, making it by far the largest stakeholder. Moody's has been faulted for enabling the global crisis by overvaluing mortgage assets.
Although Buffett has been outspoken about the need for government intervention in the crisis caused by the mortgage meltdown, he's said nothing publicly about the role of a company in which his firm is a minority holder.

Summers Raked In $$$

From at Timothy J. Burger and Kristin Jensen at Bloomberg:
Lawrence Summers, director of President Barack Obama’s National Economic Council, earned millions working at a hedge fund and speaking to banks such as Citigroup Inc. that later received taxpayer bailout money.
Hedge fund D.E. Shaw & Co. paid Summers more than $5 million in salary and other compensation in the past 16 months, according to a financial disclosure form released by the White House yesterday. Summers served as a managing director at the New York-based firm. Summers, a former Treasury secretary, also earned more than $2.7 million in speaking fees. . . .
Summers spoke to Citigroup, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. audiences twice last year, according to his disclosure statement. Lehman, which went bankrupt in September, paid Summers $67,500 for an engagement on July 30, the filing showed.
Summers contributed a $45,000 fee from Merrill Lynch & Co. for a Nov. 12 speech to charity, according to his form. When the economist learned that Merrill would be accepting taxpayer funds because of its merger with Bank of America Corp., he tried unsuccessfully to cancel the appearance and then decided to donate the money, a White House official said.
“In ordinary times, a U.S. economic expert receiving honoraria from U.S. banks wouldn’t raise many eyebrows -- nor would a money-making stint in the private sector,” said Rogan Kersh, a public-service professor at New York University. “These aren’t ordinary times, and as populist anger at the banking and hedge-fund industries continues to spread, Summers could have some serious explaining to do.”
The American economy is now being run by a financial elite that constitutes a merry-go-round from big "private" financial interests into the government and back again.
Summers, and others who are part of the cash carousel seem to feather their own nests at the nation's (and taxpayers') expense!
For more on this read Simon Johnson's The Quiet Coup in The Atlantic.

Obama Speech: Nonsense

Obama's speech in Europe on America's "arrogance" was a mea culpa couched in seemingly balanced tones.
It is typical of Obama to proclaim a new path while appearing to hedge and balance.
Using his ever-trusty teleprompter the President appears to self-edit as he virtually apologizes to the Europeans (and praises their ill-conceived "union") while pretending to seek a higher level of responsibility from them.
As a public speaker Obama is increasingly pedantic. The prompter forces him to look from side to side as he feigns a balancing act on subjects that he has crammed on. Many, many issues and subjects are tackled (all seemingly in some detail) but very little appears to have been thought through. Instead, Obama issues broad edicts and challenges while bobbing and weaving.
Most celebrity circuit speakers can get by on this as they move from one city to another giving luncheon or after-dinner speeches while they promote their latest book, TV appearance or whatever.
But the President of the United States? Not quite.
This is likely to wear thin real fast.
While our "rock star President" is busy hobnobbing with royalty and engaging in tedious rhetoric abroad, more people are out of work and things look bleaker by the moment at home.
While Americans are suffering, the President is across the pond and referring to his own countrymen as "arrogant, dismissive" and "derisive."
Meanwhile, back in the good 'ole USA, anxiety is building and the clock is ticking, Mr. President!

Obama Pal Sees 'Collectivism'

From Peggy Noonan in the Wall Street Journal:
From Bloomberg News this week: "The U.S. government and the Federal Reserve have spent or lent or committed $12.8 trillion" in new pledges. This they note is almost the value of everything the United States produced last year. The price tag comes to $42,105 for every man, woman and child in the U.S.
I happened to be rereading the economics section of Mr. Obama's second book, "The Audacity of Hope," when I read the Bloomberg story. Mr. Obama scores President Bush for contributing to a national debt that amounted to a $30,000 bill for each American. Those were the days!
The tagging was done, definitively, by an increasingly impressive (because unusually serious and sincere) member of the U.S. Senate, who happens also to be Mr. Obama's friend. Tom Coburn, an Oklahoma Republican, has been close with the Illinois Democrat since their Senate orientation in 2004; he's the man the president hugged after his big joint sessions speech last month. Thursday, in a column on RealClearPolitics.com, Mr. Coburn wrote, "I believe President Obama has proposed the most significant shift toward collectivism and away from capitalism in the history of our republic. I believe his budget aspires to not merely promote economic recovery but to lay the groundwork for sweeping expansions of government authority in areas like health care, energy and even daily commerce. If handled poorly, I'm concerned this budget could turn our government into the world's largest health care provider, mortgage bank or car dealership, among other things."
To be defined in this way is not just a negative for Mr. Obama in terms of its criticism, it amounts to being robbed, by a friend, of the vagueness that was part of his power. Mr. Coburn was all the more deadly for being fair-minded: he was tough on both parties as operating in a crisis from "scripts," with Democrats saying everything is Bush's fault and Republicans decrying high spending and taxing while failing to abjure earmarks and admit what must be cut.

Jobless Rate Continues Climb

From Jeannine Avena at the Associated Press:
The nation's unemployment rate jumped to 8.5 percent in March, the highest since late 1983, as a wide swath of employers eliminated 663,000 jobs. It's fresh evidence of the toll the recession has inflicted on America's workers, and economists say there's no relief in sight.
If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March, the highest on records dating to 1994, according to Labor Department data released Friday.
The average work week in March dropped to 33.2 hours, a new record low.
"It's an ugly report and April is going to be equally as bad," predicted Mark Zandi, chief economist at Moody's Economy.com.
Last month's tally of job losses was slightly higher than the 654,000 that economists expected. The rise in the unemployment rate matched expectations.
Employers cut 651,000 jobs in February when the jobless rate was 8.1 percent, the same as initially estimated. January's job losses, however, were revised much higher, to 741,000 . . .
Job losses were widespread last month. Construction companies cut 126,000 jobs. Factories axed 161,000. Retailers got rid of nearly 50,000. Professional and business services eliminated 133,000. Leisure and hospitality reduced employment by 40,000. Even the government cut jobs -- 5,000 of them. . . .
Even if the recession ends this year, the economy will remain frail, analysts said. Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and any recovery has staying power.
Given that, many economists predict the unemployment rate will hit 10 percent at the end of this year. The Fed says unemployment will remain elevated into 2011.
Economists say the job market may not get back to normal -- meaning a 5 percent unemployment rate -- until 2013.
"There's going to quite a long haul before you see the jobless rate head down," said Bill Cheney, chief economist at John Hancock Financial Services.

Biden Goofs Again

"Regular" Joe's been at it again.
This time he's crediting the Obama stimulus program for projects that have already been funded by the Bush Administration.
Mark Johnson of McClatchey Newspapers reports that Vice President Joe Biden brought a clear message to [Pikeville] North Carolina Wednesday: The federal recovery money isn't just for big banks and auto companies.
Biden said Pikeville would get money for a new fire station.
But here's the real story:
State Sen. David Rouzer, a Republican who represents Pikeville and worked in the Agriculture Department under President Bush, said he helped secure the fire department money last year out of the federal agency's regular programs.
"They're coming in and cherry picking the best projects and switching out the money, saying it's stimulus money," Rouzer said. "But it was already approved and in the pipeline. It's totally disingenuous to come down here and say this is stimulus money, when regardless of whether a stimulus bill passed, they were getting the money."

Congress Hands Out Bonuses

From Brody Mullins and Louise Radnofsky at The Wall Street Journal:

While Congress has been flaying companies for giving out bonuses while on the government dole, lawmakers have a longstanding tradition of rewarding their own employees with extra cash -- also courtesy of taxpayers.
Capitol Hill bonuses in 2008 were among the highest in years, according to LegiStorm, an organization that tracks payroll data. The average House aide earned 17% more in the fourth quarter of the year, when the bonuses were paid, than in previous quarters, according to the data. That was the highest jump in the eight years LegiStorm has compiled payroll information. . . .

Last year alone, more than 200 House lawmakers, both Republicans and Democrats, awarded bonuses totaling $9.1 million to more than 2,000 staff members, according to a Wall Street Journal analysis of office-disbursement forms. The money comes out of taxpayer-funded office budgets, and is surplus cash that would otherwise be forfeited if not spent.
Payments ranged from a few hundred dollars to $14,000. Lawmakers, at their own discretion, gave the money to chiefs of staff, assistants, computer technicians, and more than 100 aides who earned salaries of more than $100,000 a year. . . .

Disbursement forms show that dozens of aides working for the Financial Services Committee got a bonus from panel Chairman Barney Frank. Spokesman Steven Adamske said the Massachusetts Democrat gives bonuses to staffers because "government workers are pretty low paid." He said several aides who got bonuses had worked long hours during 2008 on the government's Troubled Asset Relief Program.
Top Financial Services Committee Republicans also gave their aides bonuses. "These were merit bonuses for people who had performed especially well," said Larry Lavender, an aide to Rep. Spencer Bachus of Alabama, the ranking Republican on the committee. . . .

Democratic Rep. Loretta Sanchez of California handed out the largest payments, giving $14,000 apiece to three aides. Spokeswoman Adrienne Elrod said her boss is "proud of the bonuses she is able to give."
Last fall, Democratic Rep. Tom Udall left the House to run for New Mexico's Senate seat. Several members of his House staff took leaves from their government jobs to work for his campaign. When Mr. Udall won the race and returned to Washington, his office budget had accrued a large surplus. He decided to spend the surplus funds by increasing salaries for nearly his entire staff for a short time.
Disbursement forms show that in late December, Mr. Udall temporarily increased salaries for 19 of his 22 employees to an annualized rate of $163,795. Among those who earned the higher pay were staff assistants, a scheduler, an executive assistant and a part-time employee.

Obama Tax Pledge Broken

From Breitbart and the Associated Press:
One of President Barack Obama's campaign pledges on taxes went up in puffs of smoke Wednesday.
The largest increase in tobacco taxes took effect despite Obama's promise not to raise taxes of any kind on families earning under $250,000 or individuals under $200,000.
This is one tax that disproportionately affects the poor, who are more likely to smoke than the rich. . . .
The extra money will be used to finance a major expansion of health insurance for children. That represents a step toward achieving another promise, to make sure all kids are covered.
Obama said in the campaign that Americans could have both—a broad boost in affordable health insurance for the nation without raising taxes on anyone but the rich.
His detailed campaign plan stated that his proposed improvement in health insurance and health technology "is more than covered" by raising taxes on the wealthy alone. It was not based on raising the tobacco tax.
The White House contends Obama's campaign pledge left room for measures such as the one financing children's health insurance. . . .
Government and private research has found that smoking rates are higher among people of low income.
A Gallup survey of 75,000 people last year fleshed out that conclusion. It found that 34 percent of respondents earning $6,000 to $12,000 were smokers, and the smoking rate consistently declined among people of higher income. Only 13 percent of people earning $90,000 or more were smokers.
Federal or state governments often turn for extra tax dollars to the one in five Americans who smoke, and many states already hit tobacco users this year. So did the tobacco companies, which raised the price on many brands by more than 70 cents a pack.
The latest increase in the federal tax is by far the largest since its introduction in 1951, when it was 8 cents a pack. It's gone up six times since, each time by no more than a dime, until now.

Unemployment Worsens!

From Reuters:
Job losses in the U.S. private sector accelerated in March, more than economists' expectations, according to a report by ADP Employer Services on Wednesday.
Private employers cut jobs by a record 742,000 in March versus a 706,000 revised cut in February that was originally reported at 697,000 jobs, said ADP, which has been carrying out the survey since 2001.
The big drop foreshadows a huge decline in the non-farm payroll reading in the government's employment report that will be released on Friday, some analysts said.
"It's a terrible number. It is almost a loss of three quarters of a million jobs which is possibly the highest we have seen so far over the length of this crisis," said Matt Esteve, foreign exchange trader with Tempus Consulting in Washington.
U.S. stock futures and the dollar fell after news of the bigger-than-expected job losses, while U.S. Treasury bonds regained some of their lost ground.
Economists had expected 655,000 private-sector job cuts in March in the ADP report, according to a recent Reuters poll.

Saks May Go Under

From Lauren Sherman at Forbes:
Saks, (Saks Fifth Avenue) the 110-year-old luxury department store, is in serious danger. The retailer has taken a beating over the last six months, starting with its 70%-off discounts before Thanksgiving, which were meant to stimulate sales but instead muffled them. Then in mid-January the company laid off 1,100 corporate workers. It's the consensus among analysts that Saks will see sales decrease by over 26% in the first quarter of 2009 to $636.57 million.
"I don't know if Saks will get through the year," says Howard Davidowitz, chairman of New York-headquartered Davidowitz & Associates, a national retail consultant and investment banking firm. "We know that the [overall] retail business is horrendous, but if you're in the discretionary or luxury space, you're dead in the water."

Obama Motorworks

Cartoon by Rex Babin in the Sacramento Bee

You're Fired!

Cartoon by Michael Ramirez, Investor's Business Daily

Meet Your New Boss

An editorial from Investor's Business Daily:
A president of the United States orders the chief executive officer of General Motors to resign. The same president is further ordering Chrysler to merge with Fiat, the Italian firm specializing in flimsy cardboard boxes on wheels.
This new reality should send a chill down the spines of all Americans. The federal government has begun to run U.S. companies.
President Obama said Monday, "my team will be working closely with GM to produce a better business plan."
To that confident assertion he added these stern sentiments:
"They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can't make future investments? Above all, have they created a credible model for how not only to survive, but to succeed in this competitive global market?"
Who is in a better position to know the answers to these questions? Rick Wagoner, the GM CEO for nine years and former GM chief financial officer who has been with the automaker since the late 1970s, even running one of its foreign affiliates in Brazil, and who holds a Harvard Business School MBA?
Or President Obama, a former community activist from the south side of Chicago with a great rhetorical gift?
The president answered that question this week by ordering Wagoner's firing.
Imagine if it were not GM, but your own small business employing a handful of people.
How would you like the country's highest-ranking elected officeholder telling you that he and "my team" know better than you about cleaning up your balance sheets and competing against your rivals? How would you like being ordered by the government to fire the person you hired as manager of your company?
Does an entity that is itself $11 trillion (and climbing) in debt have any right to criticize a private business for owing tens of billions, let alone to claim it can do better running that business?
The same arrogance was heard regarding Chrysler. The president announced that, "we've determined, after careful review, that Chrysler needs a partner to remain viable." Why was Fiat picked? Because the Italian firm "after working closely with my team, has committed to building new fuel-efficient cars and engines right here in the United States."
In other words, its politics are right.
The merger will operate under a deadline with Washington holding a gun to Chrysler's head: "We'll give Chrysler and Fiat 30 days to . . . reach a final agreement," the president said. "But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business."
It should now be clear: Federal bailout funds are a corporate narcotic. Once a company starts taking them, a chemicallike dependence develops. The addict does whatever will bring in more of the drug. Ultimately, like heroin, the short-term euphoria gives way to decreased function for the recipient, even destruction.
More importantly for the American people, letting Uncle Sam become a corporate drug dealer — with taxpayer money the addictive poison being peddled — also places Washington in a position of dictatorial control over the private sector.

Geithner: First To Go

The votes in our most-responded-to poll ever are in.

We had a huge response to this one and the response was loud and clear: By a wide margin you feel that Timothy Geithner will be the first person to leave the Obama administration.

Timmy will be the first to tumble, you say.

And it wasn't even close.

We asked: Who will be the first official to leave the Obama administration. You answered:

Timothy Geithner - 50%

Robert Gibbs - 20%

Hillary Clinton - 11%

Rahm Emanuel - 7%

Lawrence Summers - 4%

Valerie Jarrett - 2%

Someone else - 4%

So, Geithner - pack your bags! BuhhhhhhhBye!

Dodd Put Squeeze On AIG

From Jennifer Haberkorn at the Washington Times:

As Democrats prepared to take control of Congress after the 2006 elections, a top boss at the insurance giant American International Group Inc. told colleagues that Sen. Christopher J. Dodd was seeking re-election donations and he implored company executives and their spouses to give.
Getty Images Sen. Christopher J. Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee, has lost some political standing heading into re-election because of his ties to American International Group Inc.
The message in the Nov. 17, 2006, e-mail from Joseph Cassano, AIG Financial Products chief executive, was unmistakable: Mr. Dodd was "next in line" to be chairman of the Senate Banking, Housing and Urban Affairs Committee, which oversees the insurance industry, and he would "have the opportunity to set the committee's agenda on issues critical to the financial services industry.
"Given his seniority in the Senate, he will also play a key role in the Democratic Majority's leadership," Mr. Cassano wrote in the message, obtained by The Washington Times.
Mr. Dodd's campaign quickly hit pay dirt, collecting more than $160,000 from employees and their spouses at the AIG Financial Products division (AIG-FP) in Wilton, Conn., in the days before he took over as the committee chairman in January 2007. Months later, the senator transferred the donations to jump-start his 2008 presidential bid, which later failed.
Now, two years later, Mr. Dodd has emerged as a central figure in the government's decision to let executives at the now-failing AIG collect more than $218 million in bonuses, according to the Connecticut attorney general - even as the company was receiving billions of dollars in assistance from the Troubled Asset Relief Program (TARP). He acknowledged that he slipped a provision into legislation in February that authorized the bonuses, but said the Treasury Department asked him to do it.
The decision has generated national outrage and put the Obama administration into the position of trying to collect the bonuses after they were distributed. It also endangers Mr. Dodd's re-election chances in 2010 as his popularity tumbles in his home state.
Despite all the claims that Washington has changed, the tale of Mr. Dodd's lucrative political ties to AIG is a fresh reminder that special interests continue to use donations and fundraising to sow good will with powerful lawmakers like Mr. Dodd.

Obama's Got You Covered!

Cartoon by Michael Ramirez, Investor's Business Daily

Why's Obama Protecting Geithner?

From Joan Vennochi in the Boston Globe:
President Obama got frosty during Tuesday night's press conference when asked about the bonuses paid to employees of American International Group, the failed company that received an $180 billion taxpayer bailout. He said he needed time to get angry "because I like to know what I'm talking about before I speak."
When Obama finally got mad, he got mad at Wall Street. But he knows who else deserves the cold shoulder. The list of bonus conspirators includes his own economic team, which is headed by Treasury Secretary Timothy Geithner.
The controversial AIG contracts, which provide for so-called retention bonuses, were written in March 2008. A year later, after taxpayers became 80 percent owners of AIG, the bonuses were protected by Connecticut Senator Christopher Dodd, via a special provision inserted into the federal stimulus bill.
Dodd said he did it because Geithner's Treasury Department asked him to do it.
Geithner said his staff did it and he did not know "the full extent" of the bonus payments until March 10 - an assertion that defies logic. . . .
Geithner eventually said he would take "full responsibility" but insisted he did not learn of the bonuses until March 10. A Treasury Department spokesman later said Geithner "was not aware of the timing or full extent of the contractual retention payments or other bonus programs until his staff brought them to his attention on March 10." . . .
It took until March 20 for Geithner to confirm that his department pushed Dodd to write the budget loophole into the economic stimulus plan.
The president has made it clear Geithner is his guy. What he has never made clear to the American public is why.
Obama stood behind Geithner when his then-nominee said he didn't pay his taxes because of some misunderstanding of the tax code. Now Obama is standing behind Geithner when he says he didn't know about the AIG bonuses because he didn't fully understand what his staff was negotiating.
The president is now asking American taxpayers to trust Geithner's plan to help buy up so-called toxic assets, as well as to expand the government's authority to take over troubled corporations like AIG.
That's asking for a lot of trust. So far, on a personal level, Geithner has done little to show taxpayers he deserves it. But Obama continues to praise him, and even said in a "60 Minutes" interview that he would reject Geithner's resignation, if offered.
A market rally boosts Geithner's stock when it comes to pleasing Wall Street. But it shouldn't erase the honesty question for Main Street.
A Treasury secretary who trims the truth on any level is a liability. But Obama is sticking with his investment, out of loyalty, stubbornness, or both.
There has been plenty of time to figure out who knew what about the AIG bonus formula and when they knew it. If the full calculation doesn't get Obama angry, it should.