Obama gets mad, and Treasury gets creative

After the president turns up the political heat, his staff suddenly figures out how to finesse the AIG bonus debacle.

Published March 16, 2009 9:13PM (EDT)

More breaking news on the AIG front. When Obama talks, the Treasury listens. From the Wall Street Journal:

Monday afternoon, a White House official said the Treasury Department will use a planned $30 billion infusion into AIG to compel the company to repay the bonuses promised to employees of its financial-products group... The infusion, announced March 2, won't be finalized until the company and the Treasury work up repayment options, the official said. The bonuses to the financial-products division were "found to be completely unacceptable given that AIG is already surviving on taxpayer funds," the official said.

Funny, that. When the news of the bonuses broke over the weekend, here's how Bloomberg News reported the reaction of Larry Summers on ABC's "This Week." Summers called AIG's behavior "outrageous," but...

Even so, the administration can't abrogate existing contractual obligations without shaking confidence in the legal system, Summers said.

"The easy thing would be to just say, you know, 'Off with their heads,' and violate the contracts," he said. "But you have to think about the consequences of breaking contracts for the overall system of law."

And yet when the President says "off with their heads," Treasury suddenly figures out which closet the guillotine has been stored in.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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