How the Fed Failed to Tell Obama About The Bonuses

toomuchtime_ · Mar 18, 2009

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 by the company at least three months ago that by March 15 it would pay $165 million 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.

Close coordination between the Fed and the administration is now more important than ever as they near the launch of two signature programs to rescue the financial system, which together could reach $2 trillion, aimed at reviving consumer lending and purchasing soured assets and loans from ailing banks.

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 in an interview. "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.

Democrats and Republicans in Congress are increasingly questioning how Geithner could not have known about the bonuses, given his past role in AIG's bailout, which has totaled more than $170 billion so far.

"I'm sick and tired of hearing the administration and the Secretary of the Treasury say, 'I just found out about it,' " Rep. Paul E. Kanjorski (D-Pa.) said yesterday.

The dispute over AIG's payouts represents the most pressing controversy confronting the administration as it addresses the financial crisis. Some private firms say the furor has made them wary of joining the federal initiatives to help save the economy. Government officials add that the newly charged political environment will make it difficult to ask Congress for more rescue funds.

When the government rescued AIG in mid-September, no one was more central to the decision than Geithner.
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AIG executives said they disclosed in a quarterly filing late last year to federal regulators that employees at Financial Products would receive retention bonuses but the filings, with the Securities and Exchange Commission, did not detail how much individuals would be paid or the dates of the payments. The company revealed those details in meetings with New York Fed officials in January, AIG chief executive Edward M. Liddy said at a congressional hearing yesterday.

"What we've assumed is that, in our discussions with the Federal Reserve, that they were properly communicating with others," Liddy said. "It appears that we need to improve upon that process."

While declining to answer questions about the AIG bonuses, Fed spokeswoman Michelle Smith said in a statement: "The Fed and Treasury officials have coordinated closely on all aspects of the U.S. government's support for AIG during this extraordinary period."

The Fed officials did not anticipate the political firestorm that would erupt over the bonuses, a senior government official said. "They clearly underestimated the matter," the source said.

AIG executives say the Fed had been intimately involved in reviewing the contracts before the first dime was paid. The payments, which were due by March 15, were ready to be distributed last Tuesday, a senior AIG executive said. But the firm didn't get the go-ahead from government officials to make the payments until late last week.

"We weren't authorized until Thursday night," the AIG executive said. "We were negotiating with the Treasury and the Federal Reserve. Treasury indicated that they needed it cleared by the White House, as well. We hit the go button for the payments on Friday."
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How the Fed Failed to Tell Obama About The Bonuses - washingtonpost.com

manu1959 · Mar 18, 2009

the bonus clause wasn't in the original bill......it was put in after the fed and the white house asked that it be put in.....dodd stated as much today in an interview.....

but the tan george bush speaks well so he will be given a pass......

PubliusInfinitum · Mar 18, 2009

manu1959 said: ↑

the bonus clause wasn't in the original bill......it was put in after the fed and the white house asked that it be put in.....dodd stated as much today in an interview.....

but the tan george bush speaks well so he will be given a pass......
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Tanned George Bush... ROFL... Oh man... Poor George; he don't get NO Respect.

Sinatra · Mar 18, 2009

If this administration is lying over its complicity in this mess, that is one thing that will cause enough in the press to investigate.

Obama was questioned briefly regarding the issue on his way to tape the Leno show - his response was as strident and shrill as I have seen him yet.

The guy looked a bit spooked.

This story might have some real legs folks...

DiveCon · Mar 19, 2009

Sinatra said: ↑

If this administration is lying over its complicity in this mess, that is one thing that will cause enough in the press to investigate.

Obama was questioned briefly regarding the issue on his way to tape the Leno show - his response was as strident and shrill as I have seen him yet.

The guy looked a bit spooked.

This story might have some real legs folks...
Click to expand...

oh well
this is getting interesting

Zoom-boing · Mar 19, 2009

Sinatra said: ↑

If this administration is lying over its complicity in this mess, that is one thing that will cause enough in the press to investigate.

Obama was questioned briefly regarding the issue on his way to tape the Leno show - his response was as strident and shrill as I have seen him yet.

The guy looked a bit spooked.

This story might have some real legs folks...
Click to expand...

Is that a racial slur? (jk)

Diuretic · Mar 19, 2009

Zoom-boing said: ↑

Sinatra said: ↑

If this administration is lying over its complicity in this mess, that is one thing that will cause enough in the press to investigate.

Obama was questioned briefly regarding the issue on his way to tape the Leno show - his response was as strident and shrill as I have seen him yet.

The guy looked a bit spooked.

This story might have some real legs folks...
Click to expand...

Is that a racial slur? (jk)
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Fuck, that is so witty!

editec · Mar 19, 2009

I think we need to step by step blow by blow accounting of everything involved in this issue before any of us can really understand it.

I SUSPECT that the takeover of AIG was so fraught with complications and details that NO GOVERNMENT ADMINSTRATION (neither the Bush II admin or the Obama Admin) really understood what was happening.

That does not mean that NOBODY knew what was happening, merely that expecting that either POTUS to know about it, is simply ridiculous.

Midnight Marauder · Mar 19, 2009

There is no doubt now that Dodd lied about the amendment. He's now changed his story. He now admits he's the daddy of this. There's also no doubt Rahm Emmanuel knew, he was in the closed-door session with Dodd when the amendment was added. If Rahm knew, Obama knew. Let's not kid ourselves.

All the faux outrage and claims of ignorance is just a smoke screen. Claims of ignorance? "Ok, we're incompetent." That's the defense?

They still don't get why this isn't playing well with the folks. They think it's the money, it's not. It's the lies. It's the claims of ignorance. It's the faux outrage.

editec · Mar 19, 2009

Midnight Marauder said: ↑

There is no doubt now that Dodd lied about the amendment. He's now changed his story. He now admits he's the daddy of this. There's also no doubt Rahm Emmanuel knew, he was in the closed-door session with Dodd when the amendment was added. If Rahm knew, Obama knew. Let's not kid ourselves.

All the faux outrage and claims of ignorance is just a smoke screen. Claims of ignorance? "Ok, we're incompetent." That's the defense?

They still don't get why this isn't playing well with the folks. They think it's the money, it's not. It's the lies. It's the claims of ignorance. It's the faux outrage.
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Yup!

Based on what we know now it sure as hell looks like you're right.

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How the Fed Failed to Tell Obama About The Bonuses

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How the Fed Failed to Tell Obama About The Bonuses

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