Maybe this is stupid, but couldn’t the administration just . . . not pay the AIG bonuses? As in, rather than direct Tim Geithner to find a way to not pay them, just order AIG to not pay them. Order first. Let the AIGsters sue. Then while the suit is playing out, have some lawyers somewhere try to come up with a reason why the government’s position is right. It’ll take a while for the suit to play out. Maybe the government will win, and maybe the government will lose. But either way, the administration will have thrown its punch at this outrage for the short-term and we can move on to other things. I think anything less looks like phony war; “oh, we didn’t want to pay, but we just couldn’t find a way out of it.”
UPDATE: Sorry, sorry, the bonuses were actually paid out on Friday. I thought there was just information about their forthcoming payment released on Friday. Maybe Obama could stop the checks? Long story short, it beggars belief that the Obama team was genuinely outraged about this and couldn’t find a way to block the bonuses. Rather, they seem to have let them go ahead underestimating the level of political outrage they would provoke, and now are doing some ass-covering. Which is fine if the impulse leads them to better decisions in the future.