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Morning Bulletin – Thursday, March 19, 2009

A roundup of news, schedules, and key stories from CBS News Political Director Steve Chaggaris:
(AP Photo/Gerald Herbert)
As the fallout from the AIG bonuses dominates Washington, President Obama will spend a second day in California to talk about his budget blueprint. First, he'll tour a technical center in Pomona that tests rechargeable batteries for hybrid cars.

At 4pm ET, he will be joined by Gov. Arnold Schwarzenegger, R-Calif., at a town meeting in Los Angeles before taping "The Tonight Show with Jay Leno."

The Associated Press' Charles Babington points out that Mr. Obama's appearance with Gov. Schwarzenegger is designed to highlight the divisions among Republicans over the president's recently passed stimulus package.

Mr. Obama "is playing a bit of divide and conquer this week, pitting his Republican critics in Washington against GOP governors and mayors eager for the federal money that his hard-fought stimulus plan will bring," writes Babington.

"Congress recently enacted Obama's $787 billion stimulus bill without a single House Republican's vote, and with only three GOP senators' votes. Republican governors have had mixed reactions to the massive measure. Some hardline conservatives, such as Mark Sanford of South Carolina, have rejected portions of the economic bounty. Other GOP governors, including Charlie Crist of Florida, have welcomed Obama and the stimulus money. Schwarzenegger is casting his lot with that group."

Meantime, Mr. Obama's appearance on Leno's show tonight is the first time a sitting president will appear on a late-night comedy show.

"His appearance comes at a difficult moment," USA Today's Mimi Hall points out.

"Obama's administration is under fire for failing to stop insurance giant AIG from doling out hefty employee bonuses after accepting nearly $180 billion in federal bailout money. Congressional Republicans led by House Minority Leader John Boehner, R-Ohio, are rebelling against Obama's proposed budget, which calls for massive long-term deficits in the name of prompt recovery. And his poll numbers are slipping. ...

"'Former White House press secretary Ari Fleischer says Obama is making a 'smart move' by going on Leno. ... An appearance in a setting outside Washington, such as at sporting event or on a talk show, Fleischer says, 'reminds people of why they like the president and bolsters support for the tough policy days ahead.'"

Politico's Jonathan Martin, "Obama to bring star power to L.A."

Laughs aside, President Obama did wind up spending time at his town meeting last night in Costa Mesa, Calif., addressing the AIG issue.

"In the face of the swelling backlash, the White House has struggled to keep its agenda on track. And before he took questions in Costa Mesa, Obama acknowledged public anger," reports the Los Angeles Times' Peter Nicholas.

"'Now, I know a lot of you are outraged about this -- rightfully so,' he said. 'I'm outraged too.' 'It goes against our most basic sense of what's fair and what's right. It offends our values,' Obama added. He vowed to fix 'the system and culture that made them possible -- a culture where people made enormous sums of money, taking irresponsible risks that have now put the entire economy at risk.'"

AIG FALLOUT: Questions about who knew what and when are having a direct effect not only on the president but on Treasury Secretary Timothy Geithner and Senate Banking Committee Chairman Chris Dodd, D-Conn., who before the AIG issue was already facing harsh poll numbers in his 2010 re-election bid.

(CBS)
"In a retreat from earlier statements, Dodd said Wednesday that U.S. Treasury Department officials had approached him last month, urging him to modify an amendment to the federal stimulus bill that capped bonuses for executives at companies receiving aid," reports the Hartford Courant's Christopher Keating.

"On Tuesday, Dodd said that he was not a member of the conference committee that crafted the final compromise bill and said that the exception had not been in the bill as he drafted it. But late Wednesday, Dodd admitted in an interview with CNN that he had been involved in the change. 'I agreed reluctantly,' Dodd said.

"'I was changing the amendment because others were insistent.' The admission was another in a series of issues that have brought negative attention to the state's senior senator. 'It's apparent that Sen. Dodd — on a whole host of issues — has a lot of explaining to do,' state House Republican leader Lawrence Cafero said. 'People are having a credibility problem here. ... For a long time, there was an impression that Chris Dodd was an institution and could be there [in the U.S. Senate] as long as he wanted to. Once you believe that, that's when the wheels come off.'

"Dodd said he agreed to the Treasury Department's request, which made the limits apply only to future bonuses. Dodd's provision, as originally proposed, operated retroactively, meaning that it would have applied to any firm, such as AIG, that benefited from the first wave of federal assistance."

Wall Street Journal's Jonathan Weisman, "Dodd's Amendment at Crux of Bonus Issue"

The Washington Post's David Cho and Michael D. Shear report that "Federal Reserve officials knew for months about bonuses at American International Group but failed to tell the Obama administration, according to government and company officials, exposing problems in a relationship that is vital to addressing the financial crisis.

"As pressure mounted on AIG employees to return the bonuses, new details emerged yesterday about what the Fed, the Treasury Department and the White House knew regarding the payments and when. AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 to employees working at its most troubled division. The Treasury and White House said they learned of the payments from Fed officials only days before they were due. ...

(AP Photo/Susan Walsh)
"Treasury Secretary Timothy F. Geithner, a central figure in the decision to bail out AIG last fall as president of the Federal Reserve Bank of New York, said in an interview yesterday that he had not been aware of the size of the bonuses and the timing of the payments.

"'I was stunned when I learned how bad this was on Tuesday [March 10],' Geithner said. 'I shouldn't have been in that position, but it's my responsibility and I accept that.' Two days later, Geithner told the White House. The last-minute disclosure irked some of the president's senior advisers, but they refuse to point fingers now, saying the timing had little impact on the outcome or the president's public statements this week.

"'Would I have liked an earlier warning system on this? Yeah,' said David Axelrod, a senior White House adviser. 'Would it have markedly changed things? Probably not. The legal constraints are the legal constraints.' One source familiar with the discussions said the company had provided details about the bonuses to senior Treasury officials at least a month ago. A Treasury spokesman said last night that was not true."

But Time Magazine's Massimo Calabresi reports that Treasury did learn earlier than they're claiming.

(AP Photo/Mark Lennihan)
"[S]ources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned 'full details' of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG.

"'Treasury staff was informed about the new bonuses in a Feb. 28 memo that the March 15 [bonus-payment] date was upcoming,' a Federal Reserve source tells TIME. A Treasury Department source, speaking on background, confirmed the e-mail memo and its contents, saying, 'Everybody knew that [AIG] had a retention issue.'

"The New York Fed even went so far as to warn Treasury staffers that the bonuses were a hot-button issue. In the past, the memo says, the 'retention,' or bonus, issue has drawn the attention of both Capitol Hill staffers and the media. The New York Federal Reserve forwarded further details of the plan to Treasury on March 5 and even more specifics in a March 9 memo, which Treasury officials had previously said was their first detailed warning of the bonus trouble.

"The Treasury Department official says the fault appears to lie with career staffers at the department who failed to report the imminent bonus deadline up the chain to Geithner. This failure may be a by-product of the difficulty Geithner has had staffing up at Treasury. But he still has personal vulnerability on the issue. It was Geithner, as head of the New York Federal Reserve, who negotiated the AIG bailout last September. At that time, he could have sought to get bonuses repealed as part of the massive government loan."

LA Times' Ralph Vartabedian and James Oliphant, "Treasury officials explicitly allowed AIG bonuses": "In frantically rushing to the rescue of American International Group Inc. last fall, Treasury Department officials negotiated a $40-billion deal that explicitly allowed the company to set aside tens of millions of dollars for executive bonuses and richly reward individual senior executives without restrictions or any concern that the government might interfere."

The controversy has Republicans - and now Democrats - starting to set their sights on Geithner as a potential fall guy.

"Congressional Democrats are growing increasingly nervous about the ability of Treasury Secretary Timothy Geithner and the Obama administration's economic team to manage the crisis and effectively convey a coherent policy," report Bloomberg News' Laura Litvan and Christopher Stern.

"On the same day that President Barack Obama expressed 'complete confidence' in Geithner, some Democratic lawmakers said the administration's handling of the bonuses paid by American International Group Inc. was the latest in a series of missteps that have plagued Geithner and other top officials since the presidential inauguration.

"'The economic team has got to get its act together,' said Senator Ron Wyden, an Oregon Democrat. 'I want the team to begin to get to dealing with these issues in a coordinated way.' The administration has 'to accept some responsibility for where this thing is now,' said Senator James Webb, a Virginia Democrat. Asked whether his confidence in Geithner has been undermined, Webb said, 'I just don't have a comment on that.'"

4861593Wall Street Journal's Deborah Solomon, "Uproar Over Geithner's Role in Bonuses Could Vex Rescue": "The uproar comes on top of a skeptical reception to Mr. Geithner's plan to ameliorate the financial crisis and concern about his slowness in building a team. From the outset, Mr. Geithner's tenure was clouded by questions about his failure to pay personal taxes. Now, seven weeks into the job, he also finds himself pilloried by late-night comics."

NY Times' Jackie Calmes, "Outcry Over A.I.G. Is a Defining Moment for Geithner"

Politico's Eamon Javers, "Can Geithner Bounce Back?"

ALSO TODAY: First Lady Michelle Obama marks Women's History Month by meeting with 20 prominent women including musician Sheryl Crow, astronaut Mae Jemison and Ambassador Nancy Brinker before they head out to speak with DC-area girls about fulfilling their dreams. Later, she'll host a dinner at the White House to celebrate Women's History Month.

Vice President Joe Biden is in St. Cloud, Minnesota for the second meeting of the Middle Class Task Force.

COMING UP: Mr. Obama sits down with CBS' "60 Minutes"; that interview will air Sunday night. Next week, the president will hold another prime time news conference on Tuesday at 8pm ET. Also, Treasury Secretary Geithner will testify before the House Financial Services Committee on Tuesday and Thursday.

AIG FALLOUT

Time Magazine's Bill Saporito, "How AIG Became Too Big to Fail"

Associated Press' Stephen Ohlemacher, "House sets up vote today on taxing AIG bonuses": "The House is scheduled to vote today on a bill that would levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money."

Politico's Manu Raju, "GOP wary of plan to tax AIG bonuses"

Wall Street Journal's Brody Mullins and T.W. Farnam, "Critics Got Donations From Insurer": "Some of the most vocal critics of American International Group Inc.'s bonus payments are also the biggest recipients of campaign contributions from the company, including President Barack Obama and Senate Banking Chairman Christopher Dodd. Last year, as both men were running for president, each raised $104,000 from AIG employees. Mr. Dodd, a Connecticut Democrat, is the top all-time beneficiary of AIG contributions, with a total of $280,000 in donations from the company's employees and fund-raising arm since 1990, according to campaign-finance data collected by the nonpartisan Center for Responsive Politics."

LA Times' Tom Hamburger and Janet Hook, "In AIG flap, it's not just about bonuses anymore"

Washington Post's Binyamin Applebaum and Brady Dennis, "Key Argument for Incentives Questioned"

Wall Street Journal's Randall Smith and Liam Pleven, "Some Will Pay Back AIG Bonuses"

BUDGET / STIMULUS

Politico's David Rogers, "Make that $1 trillion more": "With new estimates due Friday from the Congressional Budget Office, the White House is being warned to expect a grim set of deficit projections, adding well over $1 trillion on top of the red ink already conceded in President Barack Obama's 10-year spending plan.

"Refusing to be swayed by the numbers, top aides to the president met Wednesday evening in the Capitol with House Democratic allies on moving the plan ahead, including an effort to use expedited budget procedures to advance Obama's healthcare initiative past Senate filibuster threats.

But New Hampshire Sen. Judd Gregg, the ranking Republican on the Senate Budget Committee, warned that the growing debt burden reflected in CBO figures is too big to be easily dismissed. 'The CBO re-score is going to be an eye-opening event for a lot of people who want to finesse this,' Gregg told POLITICO. 'You cannot finesse the coming fiscal calamity we are facing, the size of the debt in the out years and the size of the deficit in the out years.'"

NY Times' Edmund L. Andrews, "Fed Will Inject Another $1 Trillion to Aid the Economy"

IRAQ/AFGHANISTAN

Sens. John McCain, R-Ariz., and Joe Lieberman, I-Conn., write an op-ed about Afghanistan in today's Washington Post, "Our Must-Win War"

NY Times' Thom Shanker and Eric Schmidt, "U.S. Plans Vastly Expanded Afghan Security Force"

NY Times' Thom Shanker, "'Stop-Loss' Will All but End by 2011, Gates Says"

OBAMA ADMINISTRATION

Karl Rove writes in today's Wall Street Journal, "Obama Gives the GOP an Opening"

McClatchy Newspapers' David Goldstein, "White House caves on veterans plan, but what was it thinking?"

Politico's Carol E. Lee, "Obama finds his funny bone"

FUTURE RACES

NY-20 Special Election (3/31/09): Albany Times Union's Irene Jay Liu, "Fact check: Political duel over AIG bonuses hits 20th race"

2009 VA Governor: Washington Post's Tim Craig, "McAuliffe Unveils New Ad Mentioning Obama"

2010 NY Governor: NY Times' Jeremy W. Peters, "On Tour of New York, Paterson Gets an Earful"

2010 IL Senate: CQ Politics' Bart Jansen, "Durbin Meets With Ethics Panel About Burris"

2010 PA Senate: Philadelphia Inquirer's Thomas Fitzgerald, "Specter staying on Republican ticket"

2010 PA Senate: The Hill's Michael Sandler and Aaron Blake, "Specter crosses aisle despite election risks"

REPUBLICAN PARTY

Associated Press' Liz Sidoti, "RNC raises $5.1 million in February": "The GOP money suggests Steele's out-of-the-gate missteps, including a comment that raised questions about his abortion opposition and criticism of fellow Republicans, may not have been as damaging to fundraising as some Republicans had feared, at least not in February. Even so, a slight increase over the prior month's haul is all but certain to provide fodder to GOP critics who have cringed as Steele, with his off-the-cuff style and hefty appetite for the spotlight, took over the national GOP apparatus and became the public face of the beleaguered party."

ALSO:

Washington Times' Jim McElhatton and Christina Bellantoni, "Obama's $500,000 book bonanza"

NY Times' Motoko Rich, "Bush's Book on Decisions Is Set for 2010"

Politico's John Bresnahan, "Waters' use of funds faces scrutiny"

Washington Post's Howard Kurtz, "'The Hills'? No, TMZ Now Hits the Hill"

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