WASHINGTON — Taking responsibility for the government's handling of American International Group's controversial bonuses, President Barack Obama said public outrage over the matter is justified but should be channeled into finding a way to make sure it never happens again.
In remarks on the South Lawn of the White House before boarding Marine One to begin a trip to California, Obama said beleaguered Treasury Secretary Tim Geithner has his backing.
"I have complete confidence in Tim Geithner and my entire economic team," Obama said. "Nobody's working harder than this guy. You know, he is making all the right moves in terms of playing a bad hand."
Obama, who has faced a torrent of questions over AIG since the bonuses were reported over the weekend, said the administration is "exploring every possible avenue" to see what it can do about $165 million in payments that went to executives at the unit most responsible for the insurer's failure. He said the White House is working with lawmakers to develop a "resolution authority" giving it powers similar to those the Federal Deposit Insurance Corp. has over banks. "This is part of the broader package of financial regulatory steps that we're going to be taking that ensures that, going forward in the future, we're not going to find ourselves in these kinds of terrible positions again," Obama said. He discussed the issue earlier Wednesday with House Financial Services Chairman Barney Frank, D-Mass.
Obama was flanked on the South Lawn by Geithner, Council of Economic Advisers Chair Christina Romer and National Economic Council Director Larry Summers. His remarks came shortly after Rep. Connie Mack, R-Fla., called for Geithner to step down or be fired over the AIG mess.
"This week's news on the AIG bonus scandal is but the latest fiasco under his watch and he has lost the confidence of the American people," Mack said in a statement. "Quite simply, the Timothy Geithner experience has been a disaster."
Defending Geithner, Obama said Alexander Hamilton may be the only other Treasury Secretary to have such a multiplicity of issues to handle. Yet Geithner, who endured sharp criticism for his rollout of the financial rescue plan, has emerged as the public face of the AIG scandal.
Obama is likely to experience first hand the public furor over the bonuses when he takes questions at a town hall Wednesday in Costa Rica, Calif.
"People are rightly outraged over these particular bonuses, but just as outrageous is the culture that these bonuses are a symptom of, that has existed for far too long, a situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bag," Obama said.
"I don't want to quell anger," he said. "I think people are right to be angry. I'm angry."
Treasury said late Tuesday it is looking to use an executive-pay provision inserted into the recently passed stimulus law to recoup the bonuses. Geithner in a letter to House Speaker Nancy Pelosi said Treasury will deduct an equivalent amount - $165 million - from the latest $30 billion slice of government aid granted to AIG. The government also will require AIG, now 80%-owned by taxpayers, to make a separate $165 million "commitment to pay" Treasury through cash flows from its operations.
Obama deflected blame for the AIG situation away from Geithner, who learned of the bonuses just last week, even though the payments were disclosed in a filing in May 2008. "Ultimately, I am responsible. I am the President of the United States," Obama said.
"We've got a big mess that we're having to clean up. Nobody here drafted those contracts. Nobody here was responsible for supervising AIG and allowing themselves to put the economy at risk by some of the outrageous behavior that they were engaged in. We are responsible, though. The buck stops with me. And my goal is to make sure that we never put ourselves in this kind of position again."
Obama repeated his call for a new long-term economic growth model that moves the U.S. away from a "bubble-bust mentality."
"I hope that Wall Street and the marketplace don't think that we can return to business as usual. The business models that created a lot of paper wealth, but not real wealth in this country and have now resulted in crisis, can't be the model for economic growth long term."