"They were far too sympathetic to the needs of the bankers and in the process have not accomplished the cleanup that needed to be effected," said Peter Morici, an economist at the University of Maryland who is an outspoken critic of the bailout. "That is why we are in the mess that we are in."
Morici suggested that the taxpayer obligations to AIG could have been limited had the Treasury split off the company's poorly performing units from those parts of the insurance conglomerate that were profitable, selling the profitable divisions and providing taxpayer support to the problem parts of the firm.
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No 'haircut'
On Capitol Hill, lawmakers talked boundlessly Wednesday about the bonuses and the outrage they created. But some were beginning to look beyond the controversy over bonuses to broader questions about the AIG bailout and how it got structured.
"It's not just about the bonuses," said Sen. John Ensign (R-Nev.). "It's that so much money went overseas. Why did money go out the door without a haircut?"
"The bonuses are just a tiny percentage of the money. It's the easiest things to get people outraged about."
Republicans made a point of bashing Geithner and his role, including meetings that he had with AIG and Goldman before he was Treasury secretary. Democrats laid responsibility on Paulson, President Bush's Treasury secretary.
The furor over the AIG bonus payments -- including questions about why Geithner didn't know about them earlier -- could create trouble for the Treasury secretary as he prepares for the rollout in the next week or so of an ambitious public-private partnership to buy $1 trillion of toxic assets from banks.
Asked where he thought Geithner would be a year from now, Webb declined to comment. But he did say that the Obama administration's hands were not entirely clean. "They have to accept some responsibility," Webb said.
Sen. John Cornyn (R-Texas) said it was hard to judge the motives of the architects of the AIG deal because the proceedings and decision making were cloaked in secrecy.
"It could be self dealing of the good-old-boy system," Cornyn said. "It may have been on the up-and-up. But we don't know because it wasn't transparent."
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tom.hamburger@latimes.com
janet.hook@latimes.com
Times staff writer Ralph Vartabedian contributed to this report.
