CNN Senior White House Correspondent
With outrage mounting over AIG's $165 million in bonuses, the President's chief economic adviser offered a new line of defense for the White House in an exclusive interview with CNN.
Larry Summers suggested that if Treasury Secretary Timothy Geithner had pushed the insurance giant too hard on the bonuses, AIG could have collapsed just like Lehman Brothers and sparked an even bigger crisis.
"Secretary Geithner has used all the legal authorities that are open to him to contain and limit the payment of bonuses," said Summer, chairman of the National Economic Council. "What he did not do, and what would have been irresponsible to do, as outrageous as these payments are, would have been to put at risk the stability of the financial system. To have courted the kind of disaster that followed the decision to let Lehman Brothers simply collapse might have felt good briefly but it would have touched the lives of a huge number of Americans who would have unnecessarily become unemployed or seen destruction of their lifetime savings."
Summers said Geithner was notified about the bonuses last week and tried to stop them but ran up against a legal contract. "Secretary Geithner courageously has gone after these bonuses and will continue to go after these bonuses in a very aggressive way but we can't suspend the rule of law and we can't put the whole economy at risk," said Summers.
Asked whether AIG could get more bailout funds down the road, Summers suggested the door is open to more taxpayer money - despite the bonus controversy.
"It is wrong to govern out of anger," said Summers. "We have to recognize what we are angry about, do something about it. That's why we are focused on a new resolution regime as part of a sweeping overhaul of the financial system ... But we can't let anger stop us from taking the steps that are necessary to maintain the stability of the financial system, keep credit flowing."
Anderson Cooper goes beyond the headlines to tell stories from many points of view, so you can make up your own mind about the news. Tune in weeknights at 8 and 10 ET on CNN.
Questions or comments? Send an email
Want to know more? Go behind the scenes with