POLITICS

Geithner: Treasury Pushed For Bonus Loophole (VIDEO)

In an interview with CNN's Ali Velshi Thursday, Treasury Secretary Timothy Geithner confirmed that his department had pushed Sen. Chris Dodd to add a loophole in the federal stimulus bill allowing bailout recipients to receive bonuses. Dodd had told the network Wednesday that he had been the one to insert the loophole, but at the request of the Treasury.

From CNN:

The Treasury Department was concerned that legislation that would restrict contractual bonuses would not hold up to legal challenges, Geithner said in an interview with CNN's Ali Velshi.

"We expressed concern about this specific version. We wanted to make sure it was strong enough to survive legal challenge," Geithner said.

WATCH part of the interview:

TRANSCRIPT:

GEITHNER: I was informed by my staff of the full scale of these specific things on Tuesday, March 10th. And as soon as I heard about the full scale of these things, we moved very actively to explore every possible avenue -- legal avenue to address this problem, to make sure that, again, the assistance we were providing was not going to unduly benefit these people. And, you know, we moved very quickly. We've made it clear that the payments going forward had to be renegotiated and we're going to make sure that the taxpayer is compensated for any payments we can't recoup. And we're exploring all legal means to recoup those payments. VELSHI: But you're pretty certain on the advice that you've been given that we can't just legally not give these -- or get any of these bonuses back? GEITHNER: Absolutely. That our best judgment at the time was we had no legal ability to block a set (ph) of those payments, but those that we had the capacity to affect, we insisted or renegotiated. In any case, we're going to go back and try to recoup the payments that were already made we had no legal ability to block at that time. VELSHI: As far as you can remember, though, you did not know about this before March 10th? GEITHNER: On Tuesday I was informed about the full scale and scope of these specific bonus problems. And again, as soon as I did -- but, you know, it's my responsibility, I was in a position where I didn't know about those sooner, I take full responsibility for that. The people doing this, the Fed and the Treasury people, are working very closely together. They're doing -- dealing with an enormous set of complicated problems. They have enormous integrity and dedication. They're working very hard. And they're going to help us move forward to make sure that, again, we're protecting the interests of the American people. VELSHI: Let's just talk a little moment again about those payments and the legal ramifications of doing anything about it. Senator Dodd says that he had a clause that was put into the stimulus bill that basically allowed these payments to be made to people at AIG in this particular unit and he says that somebody at Treasury asked him to put it in. GEITHNER: Let me just start by saying that Chairman Dodd has played an enormously important leadership role in this and he's doing the right thing in trying to make sure that the assistance we provide don't go to benefit people that shouldn't benefit from these things. And I am enormously impressed by the importance of what he's trying to do in this case. VELSHI: But somebody - have we figured out who told him to put this clause in? GEITHNER: This provision? We expressed concern about this specific version. We wanted to make sure it was strong enough to survive legal challenge. But we also worked with him to strengthen the overall framework and his bill has this very important provision we're relying on now to go back and see if we can recoup payments that were made that there was no legal ability to block. VELSHI: But inadvertently might somebody at Treasury have told Senator Dodd to do something that has now resulted in these payments not being able to ... GEITHNER: No, again, what we did is just express concern about the vulnerability of a specific part of this provision, the legal challenge, as you would expect us to do, that's part of the legislative process, but again, his bill also has this very important provision that allows us to go back and see if we can recoup these payments and we're going to explore that, but in any case we're going to make sure that the American people are compensated for any payments we can recoup. VELSHI: Do we know who in Treasury had this conversation with whomever on the banking committee? GEITHNER: Treasury staff were working Senator Dodd's staff throughout this process. Again, that's part of the legislative process. VELSHI: But you weren't involved in that directly? GEITHNER: I did have with other officials some conversations with Chairman Dodd as he was going through this process but other provisions. VELSHI: So not about this particular one. It wasn't you telling ... GEITHNER: No, but I'm not sure that's relevant because Treasury staff did express concern about whether this provision was vulnerable to legal challenge.