Back before everyone's job was to spend each waking minute stewing over how on earth the Treasury let AIG keep its bonuses, Treasury had a different problem: it couldn't seem to find any qualified staff. Over the weekend I wrote a piece about this for the Guardian -- right before the AIG news broke -- that they've now published.
In many ways I think the staffing problem is worse, since it directly affects the administration's ability to come up with a financial rescue plan, whereas the AIG problem is arguably a matter of negligence and the wider policy implications are quite limited. I also think the staffing problem is directly related to decisions the administration made about how to run its confirmation process, whereas AIG suffers from some anxiety of influence. In particular, I think the current staffing problem is related to how the administration treated Geithner's own confirmation tangles:
Geithner's confirmation was a fork in the road. One road would have been to argue that the past is the past: people are fallible and mistakes are made, but we want a system in which previous error doesn't preclude future service. The Obama administration did not pick this road. Instead, they argued that the non-payment was a non-issue, and to linger over it would be irresponsible: worrying about a few million jobs was more important than worrying about a few thousand dollars in tax liability. Or, as Obama put it the night of Geithner's confirmation: "We can't waste a day."