Wednesday, May 13, 2009
AIG BonusGate: Another shoe drops
There's word this morning that the New York Fed, although not necessarily Timothy Geithner, knew about the controversial AIG bonuses many months before they became fodder for make-believe outrage in March.
Documents show that senior officials at the Federal Reserve Bank of New York received details about the bonuses more than five months before the firestorm erupted and were deeply engaged with AIG as well as outside lawyers, auditors and public relations firms about the potential controversy. But the New York Fed did not raise the alarm with the Obama administration until the end of February.
Timothy F. Geithner, who became Treasury secretary early this year, was the head of the New York Fed when it became aware of the bonus details. But his name is not among those of senior New York Fed officials mentioned in the summaries of phone calls, correspondence and other documents obtained by The Washington Post.
Those documents also illuminate who in the government, beyond the New York Fed, knew what about the bonuses at AIG's most troubled unit, and when.
Key members of Congress began investigating the payments as long ago as October and, beginning in January, repeatedly warned the Treasury about the matter.
In early February, Fed officials in New York sent details about the bonus program to their counterparts at the Federal Reserve in Washington, to prepare Chairman Ben S. Bernanke in case he was asked about the payments at a congressional hearing.
By the time the Obama administration was fully engaged in early March, the New York Fed had determined that AIG was legally bound to pay the bonuses to its Financial Products division, the documents show. Top New York Fed officials also huddled with AIG about developing a strategy to mollify angry lawmakers -- but that did little to quell the firestorm that ensued.
If this is the last revelation, it would appear to clear the Obama administration of my early suspicion that its senior people knew about these bonuses for months in advance. What are the odds, though, that this is the last revelation?
There is one thing of which we can be certain: This controversy will continue to create a useful distraction for President Obama; while the press and the average Joe are staring at this "scandal" -- which is nothing more than a failure in bureaucratic butt-covering -- the Democrats will be off restructuring health care finance and enacting complex but destructive taxes on business and trade that no reporter will go to the trouble to understand.
1 Comments:
By 
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Wed May 13, 08:07:00 AM:
Axelrod and Geithner were debating AIG bonuses no later than early February, and perhaps earlier. Geithner saw it as a small thing in the context of "the greatest financial disaster since the dawn of man." Axelrod saw the political opportunity in it and kept Obama's powder dry until March.
Targeting the AIG bonuses is right out of the Alinsky playbook. I agree, it's being used as a purposeful distraction.
Link, over
