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Goolsbee To AIG Execs: Give The Money Back

Appearing on Face The Nation Sunday, Austan Goolsbee, a member of the White House Council of Economic Advisors, told CBS News' Harry Smith that while the President is angered at the bonus situation at AIG, "We don't want to govern out of anger."

Asked how the White House plans to recover taxpayer money lost in the retention bonuses given to AIG executives (including some not retained by the company), he said President Obama is "going to look at what comes out of the House, what comes out of the Senate, see what ideas we have. At the least there is public pressure and there should be public pressure on those people at A.I.G. who aren't being paid for performance but are being paid for having lost $170 billion.

"Give the money back," Goolsbee said.

Goolsbee said the president is aware of the severity of the breach of public trust caused by the AIG scandal.

"It's one thing to be a gambler and to gamble with your own money. But here they're gambling with the retirement accounts of our parents and the college funds of our children."

Companies receiving bailouts "would not exist if it weren't for the U.S. Government. Now that makes them different than some of the other institutions which I'm sure we'll talk about with the financial rescue. But we can't let our anger over mistakes that happened last year block the fact that we've got to save the economy."

Goolsbee confirmed that the White House toxic asset plan will be released tomorrow, and in a quick preview he told Smith, "the basic idea is outlining the details of a public-private partnership so that we leverage money from the government with the private sector, so that the government doesn't get in the business of overpaying for assets and things like that."

The economic advisor was skeptical of the theory that private sector business would be turned off by the amount of government involvement in the Obama administration's plan.

"What we saw this week and what we have seen in our discussions with people is that if you lay out clear rules that are responsible, people want to participate if there's a business reason to participate. In this circumstance where we're trying to encourage the private sector to participate, that's going to be treated totally differently than companies like AIG or Fannie Mae where they are only in business because the government saved them."

He argued, however, that the President does not advocate putting controls on executive compensation.

"The president has, for more than a year, been calling for financial regulatory reform. And the centerpiece of that regulatory reform is to prevent the $170 billion bailout of AIG type where a life insurance company morphs into a hedge fund, turns into a loss that is too big to fail and the government has to come in. The point of regulatory reform is to prevent that," he said.

"Everybody has skin in the game" Goolsbee said, describing the relationship between private and public companies and the government.

Finally, he said that the gloomy Congressional Budget Office's economic forecast was "much more pessimistic about the long-run strength of the U.S. economy" than were those of private analysts and the White House.

Goolsbee reiterated that Mr. Obama is committed to cutting the deficit in half by the end of his term while investing in health care, clean energy and education. "He'll be working with Congress and he's outlined a budget program and these principles of making those three key investments and cutting the deficit in half, and I believe he's going to be able to do that," Goolsbee reasoned.

More from Face The Nation (3.22.09):

  • Frank: Retention Bonuses Are Extortion
  • Grassley Continues Assault On AIG And Geithner

  • Read the full transcript> (pdf file)

    To watch video of Austan Goolsbee on Face The Nation click below.

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