This is historical material “frozen in time”. The website is no longer updated and links to external websites and some internal pages may not work.
The White House
March 17, 2009
Briefing by White House Press Secretary Robert Gibbs, 3/17/09
THE WHITE HOUSE
Office of the Press Secretary
___________________________________________________________________________
For Immediate Release March 17, 2009
PRESS BRIEFING
BY PRESS SECRETARY ROBERT GIBBS
James S. Brady Press Briefing Room
Office of the Press Secretary
___________________________________________________________________________
For Immediate Release March 17, 2009
PRESS BRIEFING
BY PRESS SECRETARY ROBERT GIBBS
James S. Brady Press Briefing Room
2:15 P.M. EDT
MR. GIBBS: Good afternoon. Happy St. Patrick's Day to everyone. I think I'm settled.
Ms. Loven.
Q Thank you. Back to AIG, revisiting yesterday. It seems clearer, even clearer now that the administration should have known about this new round of bonuses as early as January. But I think Secretary Geithner said he only knew about it last week. And the question is why didn't he know about it sooner? Did he talk to the President about it, and why didn't the President start talking about it until yesterday, and officials over the weekend?
MR. GIBBS: I have seen what the Secretary said in the paper about his knowledge of these bonuses. I don't -- I have not talked to the President specifically about when he was informed. I do know that Secretary Geithner last week engaged with the CEO of AIG to communicate what we thought were outrageous and unacceptable bonuses; that Secretary Geithner received a commitment to lessen some of the bonuses for senior executives, a promise for the restructuring moving forward; that obviously this bumped up against a contractual deadline of March 15th, but that the Secretary of Treasury did as much in his legal power at the time to lessen the impact of what we all understand is outrageous.
The President yesterday has asked that we continue to look for ways to either block or recoup that money. There are certainly provisions, whether it's in existing law or whether specifically in provisions -- executive compensation provisions that are contained in the Recovery and Reinvestment Act that contain a safe harbor for preexisting contracts -- they're looking and working on that as a possible avenue that the President talked about yesterday.
But I also want to point to a couple of things that the President and the economic team are focused on going forward, because I think this situation and many of the situations that we have found ourselves in as a result of the amazing economic challenges that we have -- the President is also focused on two very important things going forward; the first being reissuing his call to move as quickly as possible to institute financial regulatory reform so that whatever mechanisms were used to effect companies that have gotten us -- companies and banks and insurance companies -- into the situation that we're in now never happen again.
And secondly, and equally as importantly, that the law provide for this current administration -- but for there be some legal remedy with which a resolution mechanism can take place. And what I mean by that if a business -- if a small business gets in trouble, you can take that small business -- that small business can go into bankruptcy. And as a result of provisions in bankruptcy, lots can be changed in terms of existing agreements.
If a small bank gets in trouble, the FDIC comes in and does that. For something the size of a big bank or AIG, there still is in existing law no remedy with which to unwind and resolve the problems that exist in order to protect the taxpayer. So the President, in addition to financial regulatory reform, would seek a resolution authority in order to break apart, unwind and finally resolve the issues that we face with systemic risk.
Q I understand all that. I understand you want to look forward. But is there a sense here at all that Secretary Geithner did not foresee what a public relations problem this might not be -- not get the White House involved or informed --
MR. GIBBS: I think that would be very unfair -- well, first of all, let me say the President has complete confidence. Secondly, I think it would be very unfair, based on the actions that the Secretary of Treasury took in order, as we got closer to the pending legal deadline, to restructure what could be restructured, and to change for the future, to get that commitment was an extremely important protection for the American taxpayers. Look --
Q The White House didn't start talking about this until after that deadline had passed. And I'm wondering if that's because --
MR. GIBBS: Sorry, what's that?
Q The White House didn't start talking about this issue until after the deadline was already over. So I'm wondering if that's because the White House hadn't been informed by Geithner of what was coming, or what the reason is for that.
MR. GIBBS: I think what's important most of all are the actions that were taken -- the extraordinary actions that were taken to protect the American taxpayers in accordance with all that we could do as we look back to recoup what can be recouped, and to go forward in ensuring that there are protections both in the regulatory structure and in the resolution mechanism to deal with this.
I think many of the problems that we deal with -- you know, we've had occasion in this room to talk about what happens if there are catastrophic failures, particularly of entities that pose the size of systemic risk that a corporation like AIG could cause. And having something like that declare bankruptcy or fail to exist we all have understood provides a massive systemic risk of which nobody wants to face.
Obviously, I think the Secretary of Treasury took extraordinary steps based on contracts that were in existence in April of last year in order to do all that he could to protect the taxpayer.
Yes, sir.
Q There is an interesting suggestion that's coming out of Congress on how that money might be recouped. Congressman Barney Frank has suggested that the government, as a majority stakeholder, would be in a position to sue AIG to recoup that money. And some Senate Democrats, led by Harry Reid, are warning employees that they should return money or else face a massive tax bill -- in other words, getting that money taxed --
MR. GIBBS: Right.
Q Can you address how the administration would view those proposals, whether they're seen as viable?
MR. GIBBS: Well, I think two things -- obviously, as the President mentioned yesterday and as I just talked about here, the President has asked us to do everything possible to look at recoupment for these retention bonuses that he and all of us find outrageous -- whether that's in, as I mentioned, the existing law that was passed as part of the recovery and reinvestment plan, or whether that is, secondly, some mix of new legislation that's proposed -- the administration and the legal team would certainly look at those as it is looking at existing law, including the Dodd provisions, in order to meet the test of looking at all remedies at recoupment, including whether it's changing the tax code, or whatever ideas I think percolate between now and whenever coming out of Congress. Obviously, the President is committed to working as quickly as possible with Congress to find ways to recoup this money.
Q Is filing a lawsuit seen as a real possibility?
MR. GIBBS: I'd certainly have to ask the legal team. I think, obviously, as it's been mentioned in some of the stories, there are the potential for penalties that could increase the cost of what we're talking about exponentially.
Jake.
Q The Treasury Department was informed about the AIG bonuses last September, during the previous administration. Secretary Geithner learned about the bonuses, I suppose, Wednesday of last week or around then. Can you walk us through what members of your administration learned about the bonuses and when they learned about them?
MR. GIBBS: I don't have a particular tick-tock in front of me. And obviously, I was not involved in all of those conversations. I outlined that the Secretary was obviously involved in conversations with the company to extract concessions regarding senior executive bonuses and how one might go about changing retention bonuses in existing contracts for the future.
Q That was Wednesday, right?
MR. GIBBS: I think that was over the course of several days, leading up to the legal deadline of March 15th, and obviously, what the President talked about yesterday in asking us to go back and look at the recoupment possibilities and the stuff that's being proposed in Congress.
Q I guess just the question I have is if -- you said that you have confidence, the President has confidence in Secretary Geithner. Are you confident that the oversight process is working? If these bonuses had been -- the Treasury Department had known about these bonuses since September, Secretary Geithner didn't act on it until last week.
MR. GIBBS: Well, again, I don't -- let me make sure
-- I mean, obviously, you and I understand this, but let's make sure everybody understands that there was a change of administration between September of 2008 and what we're talking about even at some point last week.
Q Okay, right, that's what I'm saying, that clearly somebody dropped the ball. Somebody didn't tell Secretary Geithner about this, or Secretary --
MR. GIBBS: Well, let's also understand -- let's also understand that these are contracts that existed, as I understand it -- and I prefaced this yesterday by, not surprisingly, telling you I'm not a contracts lawyer -- these contracts were entered into, as I understand it, in April of 2008, long before any entity of the government got involved in a rescue and a restructuring process -- that existed even before Congress passed the Trouble Asset Relief Program and where we find ourselves in the second tranche of that money today.
Q Right. But certainly you would grant that you wish that you had known about these bonuses before the $30 billion that you guys gave -- or lent AIG a few weeks ago.
MR. GIBBS: Well, again that -- as I said yesterday, and maybe I wasn't as clear -- that $30 billion facility has not been acted on, and that there are recoupment possibilities as a part of conditioning additional future assistance, of which that $30 billion is part of.
Q Do you not see that -- are you confident that the oversight process at Treasury is working properly?
MR. GIBBS: I am confident the oversight process is working. Am I confident -- what I think the President and all of America are outraged about is the message that any bonus like this sends; that as I said yesterday, and as the President said, it offends our common sense. It offends our values. It sends the wrong message by giving and rewarding the very entities which took a company like AIG with a hedge fund placed on top of it, and ran the entire company into the ground to the point where taxpayers have had to inject $170 billion. I think everybody is offended by every aspect of that.
Q But why didn't you know about it until last week?
MR. GIBBS: Well, I -- again, I will check on some exact tick-tock. But understand, there's a contract -- there are existing contracts. The Secretary of Treasury did each and every -- did everything that we know of humanly possible to change the structure of what AIG ultimately was required to pay out -- change that structure going forward.
The President has asked the team here to examine ways in which we can go back in terms of a look back and a recoupment process that includes the process in the Dodd amendment -- the Dodd legislation that was in part of the Recovery and Reinvestment, as well as mechanisms moving forward to do that.
Q I guess -- maybe I'm beating a dead horse here --
MR. GIBBS: That's what I do all day. (Laughter.) Giddy-up.
Q -- but I'm not hearing the answer. I mean, is it possible -- is it possible that Secretary Geithner did not completely inform the President about what was happening here until it really just all blew up?
MR. GIBBS: No, because -- now, let's understand again the reason that something couldn't be done -- the reason, ultimately there was -- ultimately, AIG made a determination, based on existing contracts, that they had no choice, right?
Q I know the background to it, but --
MR. GIBBS: But let's not -- let's understand that that background governs a lot that we're discussing here today, right? Contracts law. Again, I'm not a contract lawyer, but I understand some of the ramifications of that.
The President is satisfied that we are taking the steps necessary to recoup this money, but, again, is completely outraged at the entire process that has led us to this point, that has provided the very employees, AIG Financial Products, the very employees that have found the taxpayers on the hook for tens of billions, hundreds of billions of dollars, receiving the wrong message through a bonus -- he finds that offensive. That's why he's instructed us to take the steps -- all steps that we can, humanly possible, up to that deadline, and after that deadline to recoup that money.
Q Has the President then satisfied that he found out about this in a timely manner?
MR. GIBBS: Yes, the President is satisfied. The President will not be satisfied until we've exhausted every avenue that he instructed us to yesterday, and the President certainly won't be satisfied until, moving forward, we have changed the way we do business in Washington, changed the way we do business on Wall Street, to ensure that there's a financial regulatory system that's in place in order not to find things like AIG happening again; and finally, as I said, that there's a mechanism, a legal mechanism that would help us unwind and finally deal with the problem of AIG.
Again, I use this example. If you're a small business, you can change these things through bankruptcy, right? If you're a community bank that gets in trouble -- and we've all seen them, you've all written about them -- FDIC comes in, takes them over and changes the way they do business. But for an entity of the size and the structure of AIG, there's not a legal mechanism with which to resolve those issues in a way that protects the taxpayer. That's part of which -- part of what the President would like to see as a portion of financial regulatory reform.
Chip. Go ahead.
Q I think only about half of the AIG bonuses to this, the Financial Products unit, have been paid at this point. I think there's still about $200 million due. When the next round of AIG bonuses comes due, will the President say no?
MR. GIBBS: Well, again, that's exactly what Secretary Geithner has talked to the CEOs about moving forward to restructure. I think that's what I alluded to, that Secretary Geithner had taken all humanly possible steps in order to change that.
Q But the federal government owns 80 percent of AIG. Can't the President simply say, no, we're not making those payments?
MR. GIBBS: Again, I'd refer you to a contract lawyer, which I'm not one. But obviously, Chip, if it were as easy as all of that, I can assure you we'd be talking about Russia.
Q One follow-up. You've mentioned that the President and the American people are outraged. There are some on Capitol Hill who have questioned his outrage. They say, how can he come out and say he's outraged when his economic team had just thoroughly looked into these payments and concluded they had to be made?
MR. GIBBS: I suggest that there's very little basis for any of those -- for any of that thought. I don't think anybody on Capitol Hill should doubt the genuineness of the outrage.
There was -- understand that the compensation structure for executives prior to the President of the United States, Barack Obama, laying out the way we're going to do business changing, there was -- Barack Obama came in and there was a new sheriff in town on executive compensation. He changed the way we did business here and the way Wall Street did business, by instituting the toughest executive compensation rules that had ever been entered into, changing the lawlessness with which all of this was governed prior to that announcement.
So I think it would bear some going back to any of the critics of the President's genuine outrage and ask them what they did or didn't do to change the way executives are compensated before Barack Obama got to town as President of the United States -- and in one of his very first announcements, financial announcements, argued for a change going forward in the way we compensate executives.
Q One other. You said you haven't talked to the President yet about when he learned about these bonuses. Could I just put in a request that you ask him when he learned?
MR. GIBBS: I will write that down. (Laughter.)
Chuck.
Q First of all, why haven't you asked the President when he learned about this?
MR. GIBBS: There are a lot of questions I haven't asked the President, Chuck. We can enumerate them.
Q Is the problem when trying to figure out where the oversight slipped up in the fact that it is not clear? Does AIG answer to the Federal Reserve or to the Treasury Department? Is that the issue here?
MR. GIBBS: I don't know the answer to that, honestly. I don't.
Q You said -- I mean, does the -- what is the answer to that question?
MR. GIBBS: Let me ask somebody who works on this full-time.
Q We don't know who sort of has government oversight over AIG right now? The Federal Reserve or the Treasury Department?
MR. GIBBS: I can either take your question or you can ask and surmise its answer.
Q It's not answered in the tone. No, no, no, I --
MR. GIBBS: Go ahead. I'm --
Q So we don't know who has oversight over AIG?
MR. GIBBS: Chuck, you've asked me a question of which I am going to find you an accurate answer, so that by the time you transmit this to the world you'll have a good answer.
Q You were going to find out for me whether torture applies to --
MR. GIBBS: Ms. Thomas, I have.
Q -- Abu Ghraib and Bagram and the black holes and --
MR. GIBBS: Yes. The law that governs employees of this government bans torture.
This is an easy process. You ask the question, I take it, I get an answer.
Q I just hope --I don't want to wait until tomorrow.
MR. GIBBS: Well --
Q You made poor Helen wait until tomorrow -- 24 hours.
MR. GIBBS: Maybe you're torturing me and Helen. (Laughter.)
Q Don't give us any ideas. (Laughter.)
MR. GIBBS: I would posit that the CIA should look at the process in which I'm undergoing -- (laughter) -- if this is applicable under the Geneva Convention. Where's my contract lawyer?
Q I'll cede my time here. (Laughter.)
MR. GIBBS: Yes, sir.
Q Is the President concerned about the tone coming from Capitol Hill, that you've got one senator advocating for hari-kari -- not the Cubs announcer. Another senator talking about 90 percent taxation. Is there a concern that sometimes there might be this overreaction and then suddenly it doesn't look like that it's a productive conversation?
MR. GIBBS: Well, I think Senator Grassley has modified some of --
Q He didn't back down.
MR. GIBBS: No, but I -- well, I'm trying to help Senator Grassley -- even though he doesn't need it. The President understands the outrage of members of Congress. The President understands the outrage of every single American that finds what has happened for AIG, what has happened to our banking and financial system -- that the American people find how we got here, why we're here, and the steps that we regrettably have to take to stabilize that system -- why there's great offense and great consternation about it.
I don't -- I bet every one of us has talked to a friend outside the sphere of our work that finds this offensive. I don't think that the offensiveness -- I'm sure knows, honestly, no bounds, and I think it's -- I think that's very understandable. I think what --
Q You're not concerned about Congress producing something that's done in haste and then suddenly you regret signing later because --
MR. GIBBS: No, I don't -- look, I think the President will make determinations about legislation to support or sign based on what's best for the American people, first and foremost, what's best for the economy. Look, again, I think the President has taken some important steps, as I mentioned, to change the way executive compensation is done in this country. But, look, the President understands that the taxpayers have entrusted to him and to lawmakers in this town their hard-earned tax dollars that are being used to stabilize our financial system, and they understand the outrage when you hear about and read stories like this.
I think that the President, as I said, is focused on several things: how do we recoup the money; but also so that we're not in this position again, so that this country doesn't find itself repeating this situation, we put in place strong rules and regulations and give this administration and any administration moving forward the tools to resolve these highly complex situations in a way that most protects the taxpayer. I think that's -- he understands that's largely what he was elected to do and what he'll do.
Jonathan.
Q Last night, administration officials said that after carefully reviewing the situation they concluded that under current law these contracts could not be broken without actually costing the taxpayers more money in legal fees than would have been recouped. A few hours --
MR. GIBBS: To break the --
Q To break the contracts. That under current law, to break those contracts would actually cost the taxpayers more money than to let the money go out. About four hours before that, the President of the United States walked before the cameras and said that to block -- he promised to pursue every legal avenue to block these bonuses and make the American taxpayers whole. Did the President, when he went before the camera, did he know at that time that the legal review had already concluded that actually to block those bonuses would be pretty much legally unfeasible?
MR. GIBBS: Yes, and he asked us to look again. That's what he announced at the remarks in which you point -- happened four hours earlier, and that's why the review of provisions in existing law, including the Dodd compensation requirements as contained in the Recovery and Reinvestment Act, are one of the avenues with which the administration continues to look.
Again, let's point out that that's a piece of legislation that Congress has passed but rules have yet to be promulgated on, which provides an interesting case because the legislation contains provisions dealing with TARP money and preexisting contracts.
Q So when the administration officials came back four hours later and said, you know what, we can't really break these contracts, did that mean that the second review that the President was asking for was over and that --
MR. GIBBS: No, I just -- I'm not announcing the end of the review. I'm bringing you up to date on the existing review that takes place, including the provisions that I just read out.
Q And, I'm sorry, one more, then. And when Larry Summers went on television on Sunday morning and said, laws are laws, contracts are contracts; we have to respect them --
MR. GIBBS: Again, you're -- now you're asking me about something that happened Sunday. I've now brought you up to speed on what probably happened at around 4:00 p.m. on Monday. So I think you can assume that what I've said about 4:00 p.m. on Monday brings you most up to date on a timeline that you're asking me about sometime on Sunday morning.
Q But how much consultation with the economic team and the political team had been done before Mr. Summers, Dr. Summers's appearance on the Sunday shows?
MR. GIBBS: Well, again, the legal deadline for the bonuses had passed. There was a review and there's an existing review, as the President ordered yesterday.
Yes, sir.
Q Robert, we understand from your answers here that you don't have knowledge of the exact timeline, but would it be accurate to say that you were blind-sided, that the President was blind-sided by this?
MR. GIBBS: No. And I will certainly seek better timeline answers to enumerate the negative answer I just gave you.
Q Why wouldn't it be accurate to say that?
MR. GIBBS: Because the Secretary obviously took steps last week to lessen the blow of what was both contractually obligated and what had been promised but was not part of a contract that lessened the amount of money that was paid out.
Again, the Secretary of Treasury did good work in changing what was potentially out there, and I think obviously he did so in order to protect the American taxpayers. And that's why I think -- that's the basis for me answering that question.
Q One other thing. Could you elaborate on this resolution authority you mentioned?
MR. GIBBS: I will get somebody on the econ team to explain it. I can't profess that they'll explain it in better English. But basically you've got -- you have to have a mechanism by which to separate and unwind something as big as AIG is. No entity exists in law short of bankruptcy, though we've all determined through many different avenues including what happened last September, that that's not a very good option. So having the ability to resolve these issues short of a catastrophic event for our financial system, there has to be a process by which the terms of business can be changed in order to orderly wind down part of a business that, in this case, is working quite poorly, and another otherwise fairly healthy business that might struggle in any economic period, based on the fact that insurance companies have a lot of investment -- having a process to break that, unwind it, protect the taxpayers all at the same time doesn't exist short of what most -- I think almost everybody would say is a catastrophic financial event.
Q Do the autos fit into that? Is this the same --
MR. GIBBS: I think you're talking about a little bit of a potentially separate deal based on the structure of what you determine.
Q We're reporting that AIG -- they budgeted $57 million in part of the billion-dollar retention program to pay -- as retention pay for employees whose jobs are ultimately going to be eliminated at the company. Does the administration see that $57 million in retention paid for jobs that will be eliminated the same as these bonuses, and wouldn't that be --
MR. GIBBS: I have not seen -- I'm not up on what aspect of that you're talking about, but I'd be happy to look at it and have a --
Q Well, how would you view AIG setting aside $57 million to pay -- as retention payments for employees that are going to have their jobs eliminated?
MR. GIBBS: Let me take the question more broadly. The President finds it outrageous and offensive for any of these bonuses to exist.
Major.
Q I’m going to break your heart, Robert -- two questions not related to AIG. (Laughter.) On February 12th --
MR. GIBBS: I just lost a lot of money to Bill Burton. (Laughter.)
Q On February 12th in East Peoria, the President said this, referring to Jim Owens, the head of Caterpillar: "If Congress passes our plan this company will be able to rehire some of the folks who were just laid off. And that's a story I'm confident will be repeated at companies across the country, companies that are currently struggling to borrow money selling their products, struggling to make payroll, but could find themselves in a different position when we start implementing the plan." Caterpillar, as you know, today laid off 2,400 workers, 911 of them at that very same plant. On February 12th, who was wrong -- the President, Jim Owens, or is this just a result of the economy?
MR. GIBBS: Multiple choice -- excellent. Well, obviously, you mentioned in choice C -- obviously there is -- and we've talked about there have been changes in the trajectory of our economy in the first quarter and certainly a change in what people believe to be the health of the economy at the end of the last quarter. Obviously I think businesses are having to make decisions that affect both the short and the long term. We're confident, as the CEO is confident, that in the long run, based on the Recovery and Reinvestment Act, the money that's been let will provide business opportunities for the country -- I'm sorry, for the company.
Obviously you all mentioned in here that the company had concerns about provisions that would limit its ability to export to foreign countries that were modified. You know, in the intervening time period in which we visited Caterpillar and today, the recovery plan that the President signed has allocated $28 billion to states for highway construction; 37 states have filed spending plans on how exactly to spend that money. So obviously much of the equipment that you saw built at Caterpillar might certainly change as a result of some of that money. Eight billion dollars has been allocated for mass transit systems. Eight billion dollars has been allocated -- this is outside of the purview of road construction companies, but $8 billion for weatherization programs; $2 billion for law enforcement needs.
Q Can you see how maybe some folks who remember seeing that event might find this news acutely troubling? The President went there with the prospect that it was exactly this kind of company that would be most reassured about its future investment practices based on the promise of money from the federal government and --
MR. GIBBS: I think that as the money begins to go out -- including the money that I just talked about having gone out over the course of the past several weeks -- that businesses not just like Caterpillar, but businesses throughout the country, teachers in schools that potentially face layoffs, cops that the President visited that might lose their job -- that the President believes as the money begins to get let out as a result of the Recovery and Reinvestment plan that businesses will make different economic decisions.
I think the American people we believe will make different economic decisions based on the fact that in about two weeks the withholding tables will change and tax cuts that the President campaigned and promised -- campaigned on and promised will start showing up in their paychecks.
Q One other quick policy question. The President met yesterday with about 11 veterans groups, and discussed with the chief of staff and the head of the Veterans Administration the concept -- which hasn't been put in the President's budget yet, but it's on the table -- of having third-party insurance companies pay for combat-related injuries -- something that's never happened before. The American Legion put out a very strong letter today condemning that; IABA also has questioned this very strongly. Can you conceptually explain to the American people why for the first time it would be a good idea to think about the Veterans Administration having a third-party private insurance company pay for combat-related injuries?
MR. GIBBS: Let me not make the case for a decision that this administration hasn't made yet regarding the final disposition or decision on third-party billing as it relates to service-related injuries.
Q It is on the table, though, correct?
MR. GIBBS: But no decisions have been made. Let me give this answer to -- and I know that the veterans, the VSOs, the Veterans Service Organizations that were here yesterday to meet with the President, the VA chief and the Chief of Staff, who will return later in the week to meet again with the Chief of Staff, can have confidence that the budget the President has proposed represents an historic increase in discretionary spending to take care of our wounded warriors, those that have been sent off to war, have protected our freedom and have come back wounded. There's an 11-percent increase in discretionary spending in the VA budget, an historic jump -- because this President takes very seriously the needs of our wounded warriors that have given so much to protect our freedom on battlefields throughout the world.
Q But why would this even be on the table?
MR. GIBBS: Again, I think the President and the VSOs had a good conversation, and the veterans can be assured that the President understands any concerns that they would have, as well as shares -- looks forward to sharing with them the fact that the budget represents an historic increase for discretionary spending as it relates to taking care of wounded warriors.
Yes, sir.
Q Maybe help you win a little money back from Burton when we get back to AIG. (Laughter.)
Just first a request to add on to Chip and the others. As you are getting this timeline for us, perhaps you could look into the extent to which this subject was raised at the daily briefings on Thursday, Friday, Saturday, Sunday mornings, and if the subject of these bonuses at AIG were discussed at any other meetings with the President, the Chief of Staff, yourself, during the course of the kind of period we're talking about -- from the Wednesday conversation that Mr. Geithner had with the CEO leading up to the President's comments on Monday.
And a second question on this, which is the issue of contracts seems not to have been of that much concern in past expressions of outrage by the President. In other words, when the President expressed outrage about companies having $50 million jets and having posh parties -- those things often involve contracts that are often broken when you get rid of the plane or you don't have the posh party that you planned. Are those things simply a different kind of contract? Or is it that it involves less money? In other words --
MR. GIBBS: You know, I don't have access to the details of a contract for a private jet or a Super Bowl party. I honestly don't -- I think it might be hard to compare contracts -- contract to contract, without knowing exactly what legal mechanism is contained in them and what clause might -- what penalty or clause might be contained in that contract that did or didn't cause somebody to change their actions.
Q I'm not going to ask you about AIG. Russia -- the Russian President Medvedev today said that he's looking to a large-scale rearming of the military beginning in 2011. How concerned is the administration about this, particularly given that we're supposed to be pushing that reset button?
MR. GIBBS: And the President looks forward to meeting with President Medvedev in London at the beginning of the G20 economic summit. I think the President of Russia talked about -- I don't have his comments in front of me, but --
Q He blamed NATO encroachment for the need for this.
MR. GIBBS: Well, I would say obviously that NATO is a collective defense organization. I think to suggest that it poses an offensive military threat is simply wrong. NATO and the United States have worked, and will continue to work with Russia on issues of mutual concern, specifically in areas like terrorism and proliferation.
But having read the stories, it looked like the comments of the President of Russia were largely -- largely for domestic consumption.
Q Robert, the California trip -- can you tell us about the town meeting tomorrow? Is this part of the President's push-back on the budget and the notion he's biting off too much? And also, can you tell us about the decision for him to do Jay Leno?
MR. GIBBS: Yes. The President's decision to go west and do two town hall meetings -- obviously, part of that is to discuss with the American people and give the American people the opportunity to discuss with him their concerns about the economic challenges that we face; for the President to be able to explain directly to the American people some of the choices that his administration -- and some of the challenges -- that they're taking on to solve those.
Obviously, I think among the topics we'll probably likely see are the recovery plan. Given the -- given where we're going in California, I'd be surprised if the housing crisis and home foreclosures aren't part of that; obviously, financial stability; and I'm sure the outrageousness of executive compensation and bonuses will come up.
But I think the President looks forward to the ability to talk directly with the American people about the many challenges that we have, the path the President believes is the best to lay that foundation for long-term economic growth, and how he hopes that Congress, Democrats and Republicans, will work with him to make that plan a reality.
Jay Leno, I think, is an opportunity to continue that same conversation. I anticipate that a large amount of the discussion will center around the President's economic plans, and the President's economic ideas. And I think the President believes it's a unique audience with which to explain those challenges and the decisions that he's made.
Q He's the first President to do -- sitting President to do The Tonight Show --
Q Second.
Q Second sitting?
MR. GIBBS: Uh-oh.
Q Kennedy and Jack Paar, right?
MR. GIBBS: Do you guys -- do you want to come up here? (Laughter.)
Q No, I'm glad to be -- have the record corrected.
MR. GIBBS: Change again you can believe in. (Laughter.)
Q Is he practicing any zingers?
MR. GIBBS: Lord knows he'll get the opportunity, I'm sure. No, but, again, I don't think it -- we don't look at is as a -- the process of demonstrating the President's sense of humor. We look at it as a way of discussing the economic situation that we find ourselves in. Obviously California is one of the -- I think it's four states in the country that are experiencing double-digit unemployment. They face budget challenges. And I think all of those topics will be part of that discussion.
Margaret.
Q Thanks, Robert. The President made his first judicial pick today, David Hamilton. And in sort of discussing it, a senior administration official talked about the President's desire to be -- to select judges who were empathetic to real people -- that was something he talked about on the campaign. This is something that some -- particularly conservative critics have an issue with because they wonder how that wouldn't butt up against having to work within the rule of law, follow the rule of law. And I'm wondering if you can address that, and also to tell us whether you would consider Judge Hamilton to be a moderate.
MR. GIBBS: You know, let me resist the temptation to get involved in labels, but understand that what I think you're referring to from a senior administration official is something that he's enumerated many times in the past, and I would point you specifically to statements that he made surrounding confirmation votes for Justices Roberts and --
Q Alito.
MR. GIBBS: Alito. I almost said Scalia and I knew he wasn't in the Senate at that time. But that the President talked about there are -- the law will lead you to pretty clear conclusions on a vast majority of cases in interpreting either previous law, as well as the Constitution, but that -- and again, I'd point you to this, and we can certainly send it to you -- he'll be far more eloquent than I am in discussing the notion that there are cases that judges, particularly at this level, see that requires on -- regardless of which label you pick up, whether it's progressive, or conservative, or moderate, or what have you, that your own empathy and value system leads you to make a conclusion one way or the other.
The President believes that in making decisions on those justices, and in going forward and making judicial picks, that a wide variety of past experience and having the ability to empathize and walk in someone's shoes provides valuable perspective for somebody making important decisions from the bench.
Yes, sir.
Q Thank you, Robert. Yesterday, El Salvador elected a new President, and he is the first leader of that country to come from the FMLN in 20 years. And this is a transition of government that's relatively fresh and recent. Has the President been in touch with the President-elect of El Salvador? And is there any discussion about the role of Venezuelan President Chavez in the election of other chiefs of state throughout Latin America?
MR. GIBBS: I do not believe that the President has been in touch with the President-elect of El Salvador.
Q He used the President's slogan in his campaign.
MR. GIBBS: Well, it works here, too. (Laughter.) I did notice in news reports that the President-elect mentioned one of his first priorities in office is to strengthen the relationship that that country has with the United States of America. The President will later -- I was going to say later this month, but it's about a month from now -- travel to the Summit of the Americas in Trinidad and Tobago to take part in the summit there, and to begin a renewed effort to change the way we view Latin America, and do so in a way that is beneficial for both Latin America and South America -- beneficial for them and for us.
April.
Q Robert, going back to AIG quickly, remembering back a couple of months ago, before this administration came in, then-President George Bush was directing Hank Paulson to talk to the transition team, to talk to President Obama about AIG and other bailout companies. Now, was AIG on -- and these bonuses -- on that agenda when Hank Paulson talked with the President? And also --
MR. GIBBS: Let me -- I don't know the answer to that question.
Q Okay, well, can you please --
MR. GIBBS: Let me see if there's somebody who might --
Q And also, on AIG, under the last -- under this contract from last year, does it include more bonuses, or is this the last round of bonuses from that contract?
MR. GIBBS: Let me look -- on the contract. I mean, from what I read in the paper -- don't look -- I haven't even given you my answer -- I just said I looked in the paper, goodness. What if I said I heard it on the radio? (Laughter.)
Q I'm looking for answers from here.
MR. GIBBS: No, no, let me --
Q I'm looking for answers for within the administration -- not papers.
MR. GIBBS: Let me -- I feel like a figure skater who hadn't even started and I've already gotten my grade from Ms. Ryan.
Q F. (Laughter.)
Q That was quite the sports metaphor --
MR. GIBBS: I was going to say -- I'm not sure how I pulled out figure skating, but that's --
Q Figure skating -- (laughter.)
MR. GIBBS: Wow. All right. Try not to turn -- I would -- news reports suggest that there are additional bonuses that the Secretary of Treasury has talked to the CEO about the need to eliminate and change moving forward.
David.
Q One on AIG, one not. Do you support -- the administration -- what Andy Cuomo is doing in New York, subpoenaing AIG for a list of the bonuses and who's getting them? Would you like to see those names at least made public? And is the administration doing anything of its -- on its own to make that information publically available?
MR. GIBBS: I've seen reports on what the Attorney General of New York is doing. I think the specific proposal about names is something that the administration is looking at. Obviously increased aspects of transparency in this and in other -- in this and other both financial dealings and across government the President is largely supportive of. I think in the particular instance of the Attorney General, it's something that the administration is looking at.
Q And on that question of transparency, back in January, Donald Kohn, the Vice Chair of the Fed, was asked if he would say -- if he would identify those banks that had been lent I think between $800 billion and $1.2 trillion from the Fed since September. He said, no, he wouldn't reveal those names yet. In the name of transparency, do you think the administration can continue to sit on the names of all those banks that had been lent perhaps over a trillion dollars from the Fed since September?
MR. GIBBS: Well, let's let -- David, I think you understand that the Fed is a bit of an independent -- I'm being specifically sarcastic about that -- a bit of an independent agency.
Q Duly noted.
MR. GIBBS: I do know -- and I think you all have a copy of the letter that Director Summers sent to Congress regarding the release of the second $350 billion in the Troubled Asset Relief Program -- that an accounting of what new money would be spent would be done in a way that the American people could see and have confidence in.
Q But this isn't a TARP program; this is something --
MR. GIBBS: Well, let me check specifically on what those comments were. Without getting deep into Fed comments and those comments, I can certainly -- I want to give you a broader answer on what -- where the President is on the specific TARP recommendations that Dr. Summers --
Q Like Chuck, if I can get a specific answer --
MR. GIBBS: We'll see if Chuck gets what he wants. (Laughter.)
Q Thank you.
MR. GIBBS: Thanks, guys.
END
3:13 P.M. EDT
#29-03/17/2009
MR. GIBBS: Good afternoon. Happy St. Patrick's Day to everyone. I think I'm settled.
Ms. Loven.
Q Thank you. Back to AIG, revisiting yesterday. It seems clearer, even clearer now that the administration should have known about this new round of bonuses as early as January. But I think Secretary Geithner said he only knew about it last week. And the question is why didn't he know about it sooner? Did he talk to the President about it, and why didn't the President start talking about it until yesterday, and officials over the weekend?
MR. GIBBS: I have seen what the Secretary said in the paper about his knowledge of these bonuses. I don't -- I have not talked to the President specifically about when he was informed. I do know that Secretary Geithner last week engaged with the CEO of AIG to communicate what we thought were outrageous and unacceptable bonuses; that Secretary Geithner received a commitment to lessen some of the bonuses for senior executives, a promise for the restructuring moving forward; that obviously this bumped up against a contractual deadline of March 15th, but that the Secretary of Treasury did as much in his legal power at the time to lessen the impact of what we all understand is outrageous.
The President yesterday has asked that we continue to look for ways to either block or recoup that money. There are certainly provisions, whether it's in existing law or whether specifically in provisions -- executive compensation provisions that are contained in the Recovery and Reinvestment Act that contain a safe harbor for preexisting contracts -- they're looking and working on that as a possible avenue that the President talked about yesterday.
But I also want to point to a couple of things that the President and the economic team are focused on going forward, because I think this situation and many of the situations that we have found ourselves in as a result of the amazing economic challenges that we have -- the President is also focused on two very important things going forward; the first being reissuing his call to move as quickly as possible to institute financial regulatory reform so that whatever mechanisms were used to effect companies that have gotten us -- companies and banks and insurance companies -- into the situation that we're in now never happen again.
And secondly, and equally as importantly, that the law provide for this current administration -- but for there be some legal remedy with which a resolution mechanism can take place. And what I mean by that if a business -- if a small business gets in trouble, you can take that small business -- that small business can go into bankruptcy. And as a result of provisions in bankruptcy, lots can be changed in terms of existing agreements.
If a small bank gets in trouble, the FDIC comes in and does that. For something the size of a big bank or AIG, there still is in existing law no remedy with which to unwind and resolve the problems that exist in order to protect the taxpayer. So the President, in addition to financial regulatory reform, would seek a resolution authority in order to break apart, unwind and finally resolve the issues that we face with systemic risk.
Q I understand all that. I understand you want to look forward. But is there a sense here at all that Secretary Geithner did not foresee what a public relations problem this might not be -- not get the White House involved or informed --
MR. GIBBS: I think that would be very unfair -- well, first of all, let me say the President has complete confidence. Secondly, I think it would be very unfair, based on the actions that the Secretary of Treasury took in order, as we got closer to the pending legal deadline, to restructure what could be restructured, and to change for the future, to get that commitment was an extremely important protection for the American taxpayers. Look --
Q The White House didn't start talking about this until after that deadline had passed. And I'm wondering if that's because --
MR. GIBBS: Sorry, what's that?
Q The White House didn't start talking about this issue until after the deadline was already over. So I'm wondering if that's because the White House hadn't been informed by Geithner of what was coming, or what the reason is for that.
MR. GIBBS: I think what's important most of all are the actions that were taken -- the extraordinary actions that were taken to protect the American taxpayers in accordance with all that we could do as we look back to recoup what can be recouped, and to go forward in ensuring that there are protections both in the regulatory structure and in the resolution mechanism to deal with this.
I think many of the problems that we deal with -- you know, we've had occasion in this room to talk about what happens if there are catastrophic failures, particularly of entities that pose the size of systemic risk that a corporation like AIG could cause. And having something like that declare bankruptcy or fail to exist we all have understood provides a massive systemic risk of which nobody wants to face.
Obviously, I think the Secretary of Treasury took extraordinary steps based on contracts that were in existence in April of last year in order to do all that he could to protect the taxpayer.
Yes, sir.
Q There is an interesting suggestion that's coming out of Congress on how that money might be recouped. Congressman Barney Frank has suggested that the government, as a majority stakeholder, would be in a position to sue AIG to recoup that money. And some Senate Democrats, led by Harry Reid, are warning employees that they should return money or else face a massive tax bill -- in other words, getting that money taxed --
MR. GIBBS: Right.
Q Can you address how the administration would view those proposals, whether they're seen as viable?
MR. GIBBS: Well, I think two things -- obviously, as the President mentioned yesterday and as I just talked about here, the President has asked us to do everything possible to look at recoupment for these retention bonuses that he and all of us find outrageous -- whether that's in, as I mentioned, the existing law that was passed as part of the recovery and reinvestment plan, or whether that is, secondly, some mix of new legislation that's proposed -- the administration and the legal team would certainly look at those as it is looking at existing law, including the Dodd provisions, in order to meet the test of looking at all remedies at recoupment, including whether it's changing the tax code, or whatever ideas I think percolate between now and whenever coming out of Congress. Obviously, the President is committed to working as quickly as possible with Congress to find ways to recoup this money.
Q Is filing a lawsuit seen as a real possibility?
MR. GIBBS: I'd certainly have to ask the legal team. I think, obviously, as it's been mentioned in some of the stories, there are the potential for penalties that could increase the cost of what we're talking about exponentially.
Jake.
Q The Treasury Department was informed about the AIG bonuses last September, during the previous administration. Secretary Geithner learned about the bonuses, I suppose, Wednesday of last week or around then. Can you walk us through what members of your administration learned about the bonuses and when they learned about them?
MR. GIBBS: I don't have a particular tick-tock in front of me. And obviously, I was not involved in all of those conversations. I outlined that the Secretary was obviously involved in conversations with the company to extract concessions regarding senior executive bonuses and how one might go about changing retention bonuses in existing contracts for the future.
Q That was Wednesday, right?
MR. GIBBS: I think that was over the course of several days, leading up to the legal deadline of March 15th, and obviously, what the President talked about yesterday in asking us to go back and look at the recoupment possibilities and the stuff that's being proposed in Congress.
Q I guess just the question I have is if -- you said that you have confidence, the President has confidence in Secretary Geithner. Are you confident that the oversight process is working? If these bonuses had been -- the Treasury Department had known about these bonuses since September, Secretary Geithner didn't act on it until last week.
MR. GIBBS: Well, again, I don't -- let me make sure
-- I mean, obviously, you and I understand this, but let's make sure everybody understands that there was a change of administration between September of 2008 and what we're talking about even at some point last week.
Q Okay, right, that's what I'm saying, that clearly somebody dropped the ball. Somebody didn't tell Secretary Geithner about this, or Secretary --
MR. GIBBS: Well, let's also understand -- let's also understand that these are contracts that existed, as I understand it -- and I prefaced this yesterday by, not surprisingly, telling you I'm not a contracts lawyer -- these contracts were entered into, as I understand it, in April of 2008, long before any entity of the government got involved in a rescue and a restructuring process -- that existed even before Congress passed the Trouble Asset Relief Program and where we find ourselves in the second tranche of that money today.
Q Right. But certainly you would grant that you wish that you had known about these bonuses before the $30 billion that you guys gave -- or lent AIG a few weeks ago.
MR. GIBBS: Well, again that -- as I said yesterday, and maybe I wasn't as clear -- that $30 billion facility has not been acted on, and that there are recoupment possibilities as a part of conditioning additional future assistance, of which that $30 billion is part of.
Q Do you not see that -- are you confident that the oversight process at Treasury is working properly?
MR. GIBBS: I am confident the oversight process is working. Am I confident -- what I think the President and all of America are outraged about is the message that any bonus like this sends; that as I said yesterday, and as the President said, it offends our common sense. It offends our values. It sends the wrong message by giving and rewarding the very entities which took a company like AIG with a hedge fund placed on top of it, and ran the entire company into the ground to the point where taxpayers have had to inject $170 billion. I think everybody is offended by every aspect of that.
Q But why didn't you know about it until last week?
MR. GIBBS: Well, I -- again, I will check on some exact tick-tock. But understand, there's a contract -- there are existing contracts. The Secretary of Treasury did each and every -- did everything that we know of humanly possible to change the structure of what AIG ultimately was required to pay out -- change that structure going forward.
The President has asked the team here to examine ways in which we can go back in terms of a look back and a recoupment process that includes the process in the Dodd amendment -- the Dodd legislation that was in part of the Recovery and Reinvestment, as well as mechanisms moving forward to do that.
Q I guess -- maybe I'm beating a dead horse here --
MR. GIBBS: That's what I do all day. (Laughter.) Giddy-up.
Q -- but I'm not hearing the answer. I mean, is it possible -- is it possible that Secretary Geithner did not completely inform the President about what was happening here until it really just all blew up?
MR. GIBBS: No, because -- now, let's understand again the reason that something couldn't be done -- the reason, ultimately there was -- ultimately, AIG made a determination, based on existing contracts, that they had no choice, right?
Q I know the background to it, but --
MR. GIBBS: But let's not -- let's understand that that background governs a lot that we're discussing here today, right? Contracts law. Again, I'm not a contract lawyer, but I understand some of the ramifications of that.
The President is satisfied that we are taking the steps necessary to recoup this money, but, again, is completely outraged at the entire process that has led us to this point, that has provided the very employees, AIG Financial Products, the very employees that have found the taxpayers on the hook for tens of billions, hundreds of billions of dollars, receiving the wrong message through a bonus -- he finds that offensive. That's why he's instructed us to take the steps -- all steps that we can, humanly possible, up to that deadline, and after that deadline to recoup that money.
Q Has the President then satisfied that he found out about this in a timely manner?
MR. GIBBS: Yes, the President is satisfied. The President will not be satisfied until we've exhausted every avenue that he instructed us to yesterday, and the President certainly won't be satisfied until, moving forward, we have changed the way we do business in Washington, changed the way we do business on Wall Street, to ensure that there's a financial regulatory system that's in place in order not to find things like AIG happening again; and finally, as I said, that there's a mechanism, a legal mechanism that would help us unwind and finally deal with the problem of AIG.
Again, I use this example. If you're a small business, you can change these things through bankruptcy, right? If you're a community bank that gets in trouble -- and we've all seen them, you've all written about them -- FDIC comes in, takes them over and changes the way they do business. But for an entity of the size and the structure of AIG, there's not a legal mechanism with which to resolve those issues in a way that protects the taxpayer. That's part of which -- part of what the President would like to see as a portion of financial regulatory reform.
Chip. Go ahead.
Q I think only about half of the AIG bonuses to this, the Financial Products unit, have been paid at this point. I think there's still about $200 million due. When the next round of AIG bonuses comes due, will the President say no?
MR. GIBBS: Well, again, that's exactly what Secretary Geithner has talked to the CEOs about moving forward to restructure. I think that's what I alluded to, that Secretary Geithner had taken all humanly possible steps in order to change that.
Q But the federal government owns 80 percent of AIG. Can't the President simply say, no, we're not making those payments?
MR. GIBBS: Again, I'd refer you to a contract lawyer, which I'm not one. But obviously, Chip, if it were as easy as all of that, I can assure you we'd be talking about Russia.
Q One follow-up. You've mentioned that the President and the American people are outraged. There are some on Capitol Hill who have questioned his outrage. They say, how can he come out and say he's outraged when his economic team had just thoroughly looked into these payments and concluded they had to be made?
MR. GIBBS: I suggest that there's very little basis for any of those -- for any of that thought. I don't think anybody on Capitol Hill should doubt the genuineness of the outrage.
There was -- understand that the compensation structure for executives prior to the President of the United States, Barack Obama, laying out the way we're going to do business changing, there was -- Barack Obama came in and there was a new sheriff in town on executive compensation. He changed the way we did business here and the way Wall Street did business, by instituting the toughest executive compensation rules that had ever been entered into, changing the lawlessness with which all of this was governed prior to that announcement.
So I think it would bear some going back to any of the critics of the President's genuine outrage and ask them what they did or didn't do to change the way executives are compensated before Barack Obama got to town as President of the United States -- and in one of his very first announcements, financial announcements, argued for a change going forward in the way we compensate executives.
Q One other. You said you haven't talked to the President yet about when he learned about these bonuses. Could I just put in a request that you ask him when he learned?
MR. GIBBS: I will write that down. (Laughter.)
Chuck.
Q First of all, why haven't you asked the President when he learned about this?
MR. GIBBS: There are a lot of questions I haven't asked the President, Chuck. We can enumerate them.
Q Is the problem when trying to figure out where the oversight slipped up in the fact that it is not clear? Does AIG answer to the Federal Reserve or to the Treasury Department? Is that the issue here?
MR. GIBBS: I don't know the answer to that, honestly. I don't.
Q You said -- I mean, does the -- what is the answer to that question?
MR. GIBBS: Let me ask somebody who works on this full-time.
Q We don't know who sort of has government oversight over AIG right now? The Federal Reserve or the Treasury Department?
MR. GIBBS: I can either take your question or you can ask and surmise its answer.
Q It's not answered in the tone. No, no, no, I --
MR. GIBBS: Go ahead. I'm --
Q So we don't know who has oversight over AIG?
MR. GIBBS: Chuck, you've asked me a question of which I am going to find you an accurate answer, so that by the time you transmit this to the world you'll have a good answer.
Q You were going to find out for me whether torture applies to --
MR. GIBBS: Ms. Thomas, I have.
Q -- Abu Ghraib and Bagram and the black holes and --
MR. GIBBS: Yes. The law that governs employees of this government bans torture.
This is an easy process. You ask the question, I take it, I get an answer.
Q I just hope --I don't want to wait until tomorrow.
MR. GIBBS: Well --
Q You made poor Helen wait until tomorrow -- 24 hours.
MR. GIBBS: Maybe you're torturing me and Helen. (Laughter.)
Q Don't give us any ideas. (Laughter.)
MR. GIBBS: I would posit that the CIA should look at the process in which I'm undergoing -- (laughter) -- if this is applicable under the Geneva Convention. Where's my contract lawyer?
Q I'll cede my time here. (Laughter.)
MR. GIBBS: Yes, sir.
Q Is the President concerned about the tone coming from Capitol Hill, that you've got one senator advocating for hari-kari -- not the Cubs announcer. Another senator talking about 90 percent taxation. Is there a concern that sometimes there might be this overreaction and then suddenly it doesn't look like that it's a productive conversation?
MR. GIBBS: Well, I think Senator Grassley has modified some of --
Q He didn't back down.
MR. GIBBS: No, but I -- well, I'm trying to help Senator Grassley -- even though he doesn't need it. The President understands the outrage of members of Congress. The President understands the outrage of every single American that finds what has happened for AIG, what has happened to our banking and financial system -- that the American people find how we got here, why we're here, and the steps that we regrettably have to take to stabilize that system -- why there's great offense and great consternation about it.
I don't -- I bet every one of us has talked to a friend outside the sphere of our work that finds this offensive. I don't think that the offensiveness -- I'm sure knows, honestly, no bounds, and I think it's -- I think that's very understandable. I think what --
Q You're not concerned about Congress producing something that's done in haste and then suddenly you regret signing later because --
MR. GIBBS: No, I don't -- look, I think the President will make determinations about legislation to support or sign based on what's best for the American people, first and foremost, what's best for the economy. Look, again, I think the President has taken some important steps, as I mentioned, to change the way executive compensation is done in this country. But, look, the President understands that the taxpayers have entrusted to him and to lawmakers in this town their hard-earned tax dollars that are being used to stabilize our financial system, and they understand the outrage when you hear about and read stories like this.
I think that the President, as I said, is focused on several things: how do we recoup the money; but also so that we're not in this position again, so that this country doesn't find itself repeating this situation, we put in place strong rules and regulations and give this administration and any administration moving forward the tools to resolve these highly complex situations in a way that most protects the taxpayer. I think that's -- he understands that's largely what he was elected to do and what he'll do.
Jonathan.
Q Last night, administration officials said that after carefully reviewing the situation they concluded that under current law these contracts could not be broken without actually costing the taxpayers more money in legal fees than would have been recouped. A few hours --
MR. GIBBS: To break the --
Q To break the contracts. That under current law, to break those contracts would actually cost the taxpayers more money than to let the money go out. About four hours before that, the President of the United States walked before the cameras and said that to block -- he promised to pursue every legal avenue to block these bonuses and make the American taxpayers whole. Did the President, when he went before the camera, did he know at that time that the legal review had already concluded that actually to block those bonuses would be pretty much legally unfeasible?
MR. GIBBS: Yes, and he asked us to look again. That's what he announced at the remarks in which you point -- happened four hours earlier, and that's why the review of provisions in existing law, including the Dodd compensation requirements as contained in the Recovery and Reinvestment Act, are one of the avenues with which the administration continues to look.
Again, let's point out that that's a piece of legislation that Congress has passed but rules have yet to be promulgated on, which provides an interesting case because the legislation contains provisions dealing with TARP money and preexisting contracts.
Q So when the administration officials came back four hours later and said, you know what, we can't really break these contracts, did that mean that the second review that the President was asking for was over and that --
MR. GIBBS: No, I just -- I'm not announcing the end of the review. I'm bringing you up to date on the existing review that takes place, including the provisions that I just read out.
Q And, I'm sorry, one more, then. And when Larry Summers went on television on Sunday morning and said, laws are laws, contracts are contracts; we have to respect them --
MR. GIBBS: Again, you're -- now you're asking me about something that happened Sunday. I've now brought you up to speed on what probably happened at around 4:00 p.m. on Monday. So I think you can assume that what I've said about 4:00 p.m. on Monday brings you most up to date on a timeline that you're asking me about sometime on Sunday morning.
Q But how much consultation with the economic team and the political team had been done before Mr. Summers, Dr. Summers's appearance on the Sunday shows?
MR. GIBBS: Well, again, the legal deadline for the bonuses had passed. There was a review and there's an existing review, as the President ordered yesterday.
Yes, sir.
Q Robert, we understand from your answers here that you don't have knowledge of the exact timeline, but would it be accurate to say that you were blind-sided, that the President was blind-sided by this?
MR. GIBBS: No. And I will certainly seek better timeline answers to enumerate the negative answer I just gave you.
Q Why wouldn't it be accurate to say that?
MR. GIBBS: Because the Secretary obviously took steps last week to lessen the blow of what was both contractually obligated and what had been promised but was not part of a contract that lessened the amount of money that was paid out.
Again, the Secretary of Treasury did good work in changing what was potentially out there, and I think obviously he did so in order to protect the American taxpayers. And that's why I think -- that's the basis for me answering that question.
Q One other thing. Could you elaborate on this resolution authority you mentioned?
MR. GIBBS: I will get somebody on the econ team to explain it. I can't profess that they'll explain it in better English. But basically you've got -- you have to have a mechanism by which to separate and unwind something as big as AIG is. No entity exists in law short of bankruptcy, though we've all determined through many different avenues including what happened last September, that that's not a very good option. So having the ability to resolve these issues short of a catastrophic event for our financial system, there has to be a process by which the terms of business can be changed in order to orderly wind down part of a business that, in this case, is working quite poorly, and another otherwise fairly healthy business that might struggle in any economic period, based on the fact that insurance companies have a lot of investment -- having a process to break that, unwind it, protect the taxpayers all at the same time doesn't exist short of what most -- I think almost everybody would say is a catastrophic financial event.
Q Do the autos fit into that? Is this the same --
MR. GIBBS: I think you're talking about a little bit of a potentially separate deal based on the structure of what you determine.
Q We're reporting that AIG -- they budgeted $57 million in part of the billion-dollar retention program to pay -- as retention pay for employees whose jobs are ultimately going to be eliminated at the company. Does the administration see that $57 million in retention paid for jobs that will be eliminated the same as these bonuses, and wouldn't that be --
MR. GIBBS: I have not seen -- I'm not up on what aspect of that you're talking about, but I'd be happy to look at it and have a --
Q Well, how would you view AIG setting aside $57 million to pay -- as retention payments for employees that are going to have their jobs eliminated?
MR. GIBBS: Let me take the question more broadly. The President finds it outrageous and offensive for any of these bonuses to exist.
Major.
Q I’m going to break your heart, Robert -- two questions not related to AIG. (Laughter.) On February 12th --
MR. GIBBS: I just lost a lot of money to Bill Burton. (Laughter.)
Q On February 12th in East Peoria, the President said this, referring to Jim Owens, the head of Caterpillar: "If Congress passes our plan this company will be able to rehire some of the folks who were just laid off. And that's a story I'm confident will be repeated at companies across the country, companies that are currently struggling to borrow money selling their products, struggling to make payroll, but could find themselves in a different position when we start implementing the plan." Caterpillar, as you know, today laid off 2,400 workers, 911 of them at that very same plant. On February 12th, who was wrong -- the President, Jim Owens, or is this just a result of the economy?
MR. GIBBS: Multiple choice -- excellent. Well, obviously, you mentioned in choice C -- obviously there is -- and we've talked about there have been changes in the trajectory of our economy in the first quarter and certainly a change in what people believe to be the health of the economy at the end of the last quarter. Obviously I think businesses are having to make decisions that affect both the short and the long term. We're confident, as the CEO is confident, that in the long run, based on the Recovery and Reinvestment Act, the money that's been let will provide business opportunities for the country -- I'm sorry, for the company.
Obviously you all mentioned in here that the company had concerns about provisions that would limit its ability to export to foreign countries that were modified. You know, in the intervening time period in which we visited Caterpillar and today, the recovery plan that the President signed has allocated $28 billion to states for highway construction; 37 states have filed spending plans on how exactly to spend that money. So obviously much of the equipment that you saw built at Caterpillar might certainly change as a result of some of that money. Eight billion dollars has been allocated for mass transit systems. Eight billion dollars has been allocated -- this is outside of the purview of road construction companies, but $8 billion for weatherization programs; $2 billion for law enforcement needs.
Q Can you see how maybe some folks who remember seeing that event might find this news acutely troubling? The President went there with the prospect that it was exactly this kind of company that would be most reassured about its future investment practices based on the promise of money from the federal government and --
MR. GIBBS: I think that as the money begins to go out -- including the money that I just talked about having gone out over the course of the past several weeks -- that businesses not just like Caterpillar, but businesses throughout the country, teachers in schools that potentially face layoffs, cops that the President visited that might lose their job -- that the President believes as the money begins to get let out as a result of the Recovery and Reinvestment plan that businesses will make different economic decisions.
I think the American people we believe will make different economic decisions based on the fact that in about two weeks the withholding tables will change and tax cuts that the President campaigned and promised -- campaigned on and promised will start showing up in their paychecks.
Q One other quick policy question. The President met yesterday with about 11 veterans groups, and discussed with the chief of staff and the head of the Veterans Administration the concept -- which hasn't been put in the President's budget yet, but it's on the table -- of having third-party insurance companies pay for combat-related injuries -- something that's never happened before. The American Legion put out a very strong letter today condemning that; IABA also has questioned this very strongly. Can you conceptually explain to the American people why for the first time it would be a good idea to think about the Veterans Administration having a third-party private insurance company pay for combat-related injuries?
MR. GIBBS: Let me not make the case for a decision that this administration hasn't made yet regarding the final disposition or decision on third-party billing as it relates to service-related injuries.
Q It is on the table, though, correct?
MR. GIBBS: But no decisions have been made. Let me give this answer to -- and I know that the veterans, the VSOs, the Veterans Service Organizations that were here yesterday to meet with the President, the VA chief and the Chief of Staff, who will return later in the week to meet again with the Chief of Staff, can have confidence that the budget the President has proposed represents an historic increase in discretionary spending to take care of our wounded warriors, those that have been sent off to war, have protected our freedom and have come back wounded. There's an 11-percent increase in discretionary spending in the VA budget, an historic jump -- because this President takes very seriously the needs of our wounded warriors that have given so much to protect our freedom on battlefields throughout the world.
Q But why would this even be on the table?
MR. GIBBS: Again, I think the President and the VSOs had a good conversation, and the veterans can be assured that the President understands any concerns that they would have, as well as shares -- looks forward to sharing with them the fact that the budget represents an historic increase for discretionary spending as it relates to taking care of wounded warriors.
Yes, sir.
Q Maybe help you win a little money back from Burton when we get back to AIG. (Laughter.)
Just first a request to add on to Chip and the others. As you are getting this timeline for us, perhaps you could look into the extent to which this subject was raised at the daily briefings on Thursday, Friday, Saturday, Sunday mornings, and if the subject of these bonuses at AIG were discussed at any other meetings with the President, the Chief of Staff, yourself, during the course of the kind of period we're talking about -- from the Wednesday conversation that Mr. Geithner had with the CEO leading up to the President's comments on Monday.
And a second question on this, which is the issue of contracts seems not to have been of that much concern in past expressions of outrage by the President. In other words, when the President expressed outrage about companies having $50 million jets and having posh parties -- those things often involve contracts that are often broken when you get rid of the plane or you don't have the posh party that you planned. Are those things simply a different kind of contract? Or is it that it involves less money? In other words --
MR. GIBBS: You know, I don't have access to the details of a contract for a private jet or a Super Bowl party. I honestly don't -- I think it might be hard to compare contracts -- contract to contract, without knowing exactly what legal mechanism is contained in them and what clause might -- what penalty or clause might be contained in that contract that did or didn't cause somebody to change their actions.
Q I'm not going to ask you about AIG. Russia -- the Russian President Medvedev today said that he's looking to a large-scale rearming of the military beginning in 2011. How concerned is the administration about this, particularly given that we're supposed to be pushing that reset button?
MR. GIBBS: And the President looks forward to meeting with President Medvedev in London at the beginning of the G20 economic summit. I think the President of Russia talked about -- I don't have his comments in front of me, but --
Q He blamed NATO encroachment for the need for this.
MR. GIBBS: Well, I would say obviously that NATO is a collective defense organization. I think to suggest that it poses an offensive military threat is simply wrong. NATO and the United States have worked, and will continue to work with Russia on issues of mutual concern, specifically in areas like terrorism and proliferation.
But having read the stories, it looked like the comments of the President of Russia were largely -- largely for domestic consumption.
Q Robert, the California trip -- can you tell us about the town meeting tomorrow? Is this part of the President's push-back on the budget and the notion he's biting off too much? And also, can you tell us about the decision for him to do Jay Leno?
MR. GIBBS: Yes. The President's decision to go west and do two town hall meetings -- obviously, part of that is to discuss with the American people and give the American people the opportunity to discuss with him their concerns about the economic challenges that we face; for the President to be able to explain directly to the American people some of the choices that his administration -- and some of the challenges -- that they're taking on to solve those.
Obviously, I think among the topics we'll probably likely see are the recovery plan. Given the -- given where we're going in California, I'd be surprised if the housing crisis and home foreclosures aren't part of that; obviously, financial stability; and I'm sure the outrageousness of executive compensation and bonuses will come up.
But I think the President looks forward to the ability to talk directly with the American people about the many challenges that we have, the path the President believes is the best to lay that foundation for long-term economic growth, and how he hopes that Congress, Democrats and Republicans, will work with him to make that plan a reality.
Jay Leno, I think, is an opportunity to continue that same conversation. I anticipate that a large amount of the discussion will center around the President's economic plans, and the President's economic ideas. And I think the President believes it's a unique audience with which to explain those challenges and the decisions that he's made.
Q He's the first President to do -- sitting President to do The Tonight Show --
Q Second.
Q Second sitting?
MR. GIBBS: Uh-oh.
Q Kennedy and Jack Paar, right?
MR. GIBBS: Do you guys -- do you want to come up here? (Laughter.)
Q No, I'm glad to be -- have the record corrected.
MR. GIBBS: Change again you can believe in. (Laughter.)
Q Is he practicing any zingers?
MR. GIBBS: Lord knows he'll get the opportunity, I'm sure. No, but, again, I don't think it -- we don't look at is as a -- the process of demonstrating the President's sense of humor. We look at it as a way of discussing the economic situation that we find ourselves in. Obviously California is one of the -- I think it's four states in the country that are experiencing double-digit unemployment. They face budget challenges. And I think all of those topics will be part of that discussion.
Margaret.
Q Thanks, Robert. The President made his first judicial pick today, David Hamilton. And in sort of discussing it, a senior administration official talked about the President's desire to be -- to select judges who were empathetic to real people -- that was something he talked about on the campaign. This is something that some -- particularly conservative critics have an issue with because they wonder how that wouldn't butt up against having to work within the rule of law, follow the rule of law. And I'm wondering if you can address that, and also to tell us whether you would consider Judge Hamilton to be a moderate.
MR. GIBBS: You know, let me resist the temptation to get involved in labels, but understand that what I think you're referring to from a senior administration official is something that he's enumerated many times in the past, and I would point you specifically to statements that he made surrounding confirmation votes for Justices Roberts and --
Q Alito.
MR. GIBBS: Alito. I almost said Scalia and I knew he wasn't in the Senate at that time. But that the President talked about there are -- the law will lead you to pretty clear conclusions on a vast majority of cases in interpreting either previous law, as well as the Constitution, but that -- and again, I'd point you to this, and we can certainly send it to you -- he'll be far more eloquent than I am in discussing the notion that there are cases that judges, particularly at this level, see that requires on -- regardless of which label you pick up, whether it's progressive, or conservative, or moderate, or what have you, that your own empathy and value system leads you to make a conclusion one way or the other.
The President believes that in making decisions on those justices, and in going forward and making judicial picks, that a wide variety of past experience and having the ability to empathize and walk in someone's shoes provides valuable perspective for somebody making important decisions from the bench.
Yes, sir.
Q Thank you, Robert. Yesterday, El Salvador elected a new President, and he is the first leader of that country to come from the FMLN in 20 years. And this is a transition of government that's relatively fresh and recent. Has the President been in touch with the President-elect of El Salvador? And is there any discussion about the role of Venezuelan President Chavez in the election of other chiefs of state throughout Latin America?
MR. GIBBS: I do not believe that the President has been in touch with the President-elect of El Salvador.
Q He used the President's slogan in his campaign.
MR. GIBBS: Well, it works here, too. (Laughter.) I did notice in news reports that the President-elect mentioned one of his first priorities in office is to strengthen the relationship that that country has with the United States of America. The President will later -- I was going to say later this month, but it's about a month from now -- travel to the Summit of the Americas in Trinidad and Tobago to take part in the summit there, and to begin a renewed effort to change the way we view Latin America, and do so in a way that is beneficial for both Latin America and South America -- beneficial for them and for us.
April.
Q Robert, going back to AIG quickly, remembering back a couple of months ago, before this administration came in, then-President George Bush was directing Hank Paulson to talk to the transition team, to talk to President Obama about AIG and other bailout companies. Now, was AIG on -- and these bonuses -- on that agenda when Hank Paulson talked with the President? And also --
MR. GIBBS: Let me -- I don't know the answer to that question.
Q Okay, well, can you please --
MR. GIBBS: Let me see if there's somebody who might --
Q And also, on AIG, under the last -- under this contract from last year, does it include more bonuses, or is this the last round of bonuses from that contract?
MR. GIBBS: Let me look -- on the contract. I mean, from what I read in the paper -- don't look -- I haven't even given you my answer -- I just said I looked in the paper, goodness. What if I said I heard it on the radio? (Laughter.)
Q I'm looking for answers from here.
MR. GIBBS: No, no, let me --
Q I'm looking for answers for within the administration -- not papers.
MR. GIBBS: Let me -- I feel like a figure skater who hadn't even started and I've already gotten my grade from Ms. Ryan.
Q F. (Laughter.)
Q That was quite the sports metaphor --
MR. GIBBS: I was going to say -- I'm not sure how I pulled out figure skating, but that's --
Q Figure skating -- (laughter.)
MR. GIBBS: Wow. All right. Try not to turn -- I would -- news reports suggest that there are additional bonuses that the Secretary of Treasury has talked to the CEO about the need to eliminate and change moving forward.
David.
Q One on AIG, one not. Do you support -- the administration -- what Andy Cuomo is doing in New York, subpoenaing AIG for a list of the bonuses and who's getting them? Would you like to see those names at least made public? And is the administration doing anything of its -- on its own to make that information publically available?
MR. GIBBS: I've seen reports on what the Attorney General of New York is doing. I think the specific proposal about names is something that the administration is looking at. Obviously increased aspects of transparency in this and in other -- in this and other both financial dealings and across government the President is largely supportive of. I think in the particular instance of the Attorney General, it's something that the administration is looking at.
Q And on that question of transparency, back in January, Donald Kohn, the Vice Chair of the Fed, was asked if he would say -- if he would identify those banks that had been lent I think between $800 billion and $1.2 trillion from the Fed since September. He said, no, he wouldn't reveal those names yet. In the name of transparency, do you think the administration can continue to sit on the names of all those banks that had been lent perhaps over a trillion dollars from the Fed since September?
MR. GIBBS: Well, let's let -- David, I think you understand that the Fed is a bit of an independent -- I'm being specifically sarcastic about that -- a bit of an independent agency.
Q Duly noted.
MR. GIBBS: I do know -- and I think you all have a copy of the letter that Director Summers sent to Congress regarding the release of the second $350 billion in the Troubled Asset Relief Program -- that an accounting of what new money would be spent would be done in a way that the American people could see and have confidence in.
Q But this isn't a TARP program; this is something --
MR. GIBBS: Well, let me check specifically on what those comments were. Without getting deep into Fed comments and those comments, I can certainly -- I want to give you a broader answer on what -- where the President is on the specific TARP recommendations that Dr. Summers --
Q Like Chuck, if I can get a specific answer --
MR. GIBBS: We'll see if Chuck gets what he wants. (Laughter.)
Q Thank you.
MR. GIBBS: Thanks, guys.
END
3:13 P.M. EDT
#29-03/17/2009