How the Fed Failed to Tell Obama About The Bonuses

How the Fed Failed to Tell Obama About The Bonuses

www.washingtonpost.com

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. ...

AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 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. ...

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. "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. ...

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.

(visit the link for the full news article)



[edit on 19-3-2009 by converge]

Someone's lying. Or perhaps they all are.

When the government rescued AIG in mid-September, no one was more central to the decision than Geithner.

AIG officials met with Geithner and then Treasury Secretary Henry M. Paulson Jr. in New York on Sept. 14 to warn them of the dire threat posed by the derivative business developed by AIG's Financial Products unit. Executives told the two men the firm needed help but had at least a week before it faced collapse, sources said.

Paulson left for Washington. But Geithner stayed up all night with officials at the New York Fed to examine AIG's situation. He discovered not only an enormous number of complicated trades, estimated at $2 trillion, but that AIG had backed retirements funds across the nation. He also realized that a collapse of AIG was imminent, and that the fallout would ripple across the banking system, sources familiar with the episode said.

Geithner, with Paulson and Fed Chairman Ben S. Bernanke, decided to lend the company $80 billion in exchange for an 80 percent ownership equity stake.

About a month later, Geithner redesigned the bailout package for AIG, which raised the total to about $123 billion. ...

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. ...

Geithner said the Fed did not tell him about the bonuses until March 10. He immediately huddled with his senior staff, examining options, but ultimately concluded that the government could not change contracts for work that had already been done.

Geithner is either a liar or an incompetent.

Over the following days, Obama came out swinging, denouncing the bonuses while expressing "complete confidence" in Geithner. Yesterday, he continued the effort, saying that "I don't want to quell anger. I think people are right to be angry. I'm angry."

I understand the President might be worried that firing Geithner could make matters worse at this difficult time, but I can't believe that Geithner, who was at the center of the bailout with the Fed and Hank Paulson, didn't know about this.

I think this should be investigated and if we find out that Geithner did know about the bonuses and now is playing the fool, Obama should fire him no matter what.

www.washingtonpost.com
(visit the link for the full news article)


[edit on 19-3-2009 by converge]

Nobody is lying my friend
it's very simple

Nobody told Obama that they deposited hundreds of thousands of dollars into his account.

they are only human, lack of communication happens often!

They're all lying. They ALL knew about it. In fact, the Obama administration lobbied to have the bonuses protected.

And yes, Geithner is full of ****.

Treasury learned of AIG bonuses earlier than claimed.

Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG's impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned "full details" of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG.

[edit on 19-3-2009 by vor78]

reply to post by vor78


Exactly!

Dodd put his own amendment into the bailout to protect these bonuses.

Everybody knew what was going on. This fake outrage is nothing more than a lame attempt to save Obama's image.

Meanwhile his approval ratings continue to decline because the American people are not idiots!

reply to post by nyk537


Yep. I'm guessing that we'll eventually learn that Geithner knew the full extent of it well before that February 28th date from the Time article I posted as well.

I feel that the whole episode is a distraction from something far bigger and that something is the rest of the 'stimulus' package. Obama has been trying to stir up outrage against AIG in order deflect criticism from that gigantic steaming piece of crap that he foisted upon the American people.

The only problem is, it looks like they've been caught red-handed. There's no telling how deep this rabbit hole goes once you look past just AIG.

reply to post by vor78

The final language of the Dodd amendment specifically excluded bonuses from contracts signed before the bill's passage -- a broad category that included the AIG bonuses. At the time, few objected to that move, which was designed to ensure the measure was constitutional.

Even if this is true, why didn't they at that moment take the time to check AIG's (et al) contracts and due bonuses to prevent, mitigate or at least not get caught by surprise by this situation?

This fake outrage from everyone involved is disgusting.

And Congress now, as usual, say it will deal with it after the damage is done.

Both Congress and President Obama have expressed surprise over the bonuses and demanded that the money be paid back. Democratic leaders said late Wednesday that the House will vote on legislation aimed at recovering the bonuses.

reply to post by converge


Because its exactly as you say. Its false outrage. They knew exactly what were doing when they amended that bill to allow the bonuses. Lets not forget who the two biggest recipients of AIG campaign cash were, afterall .

And this attempt by Congress to recoup the money is equally disgusting. They allowed it to happen. Now, they want to go back and punish AIG retroactively due to moral outrage. While a part of me thinks AIG deserves whatever is coming their way, this sets a BAD precedent if it is allowed to happen.

Dodd: Administration pushed for language protecting bonuses

Dodd acknowledged his role in the change after a Treasury Department official told CNN the administration pushed for the language.

Dodd, a Democrat, told CNN's Dana Bash and Wolf Blitzer that Obama administration officials pushed for the language to an amendment designed to limit bonuses and "golden parachutes" at those companies.

"The administration had expressed reservations," Dodd said. "They asked for modifications. The alternative was losing the amendment entirely."

Nice spin there Dodd... try not to get too dizzy.

reply to post by nyk537


I'm irritated more with the "surprise" the government is showing with these bonuses than I am with the bonuses themselves. The bonuses were WRITTEN INTO THE STIMULUS! Yes, the one nobody had time to read before it was railroaded through Congress.

had Obama made true on his "transparency" promise someone besides Dodd may have known about them!

reply to post by slicobacon


Bah. They all read it. It was what Congress WANTED or at least the ones that voted for that crapulent stimulus package did. It was only when the public realized what had happened and started gathering up the torches and pitchforks that all of your Congresscritters said, 'wait a minute, these people are pissed. We'd better act like we are, too!'

I would love it if there was some sense of honesty somewhere in this whole mess.

The reality is, and as it has been since long before the seeds for these bailouts were sown by corrupt politicians furthering legislation for political favor, the decisions to turn the other cheek with respect to all the shenanigans in the financial sector were made to allow for the furtherance of greed among those who now benefit from bailouts, bonuses and the like.

Many of us see clearly through their bullcrap.

It would be refreshing and quite a step in the road to recovery for these corporate whores masquarading as politicians to admit they were pretty much up to speed at every turn in this mess but simply curried the favour of their johns so ensure they too recieved their piece of this shell game being funded from our wallets and futures of our children and their children.

But, they'll continue to play the blame game, there will never be accountability and this mess will continue to unravel at a snail's pace such that the ensuing fallout is sheer economic torture for those who can least afford it.

That'd be . . . well . . . you-n-me, folks.

Relish in it as it is the bed in which we shall lie until such time that we dispatch those who continue to perpetuate this reality.

Originally posted by slicobacon
I'm irritated more with the "surprise" the government is showing with these bonuses than I am with the bonuses themselves. The bonuses were WRITTEN INTO THE STIMULUS!

Yes, the one nobody had time to read before it was railroaded through Congress.

Well, according to that CNBC link vor78 posted, it's not so much that the bonuses were written into the stimulus, but they removed any provisions and caps for bonuses in contracts that were signed before the passing of the bill, because it could be unconstitutional.

Which ultimately means that they were aware that there were contracts and bonuses that were going to be honored sooner or later eventually, that were outside of the provisions of the bill.

But it's like I said, if at that moment they didn't even took the time to check the contracts and bonuses of these companies before passing that legislation, then they are incompetent and don't have the right to act surprised now.


[edit on 19-3-2009 by converge]

Originally posted by slicobacon

I'm irritated more with the "surprise" the government is showing with these bonuses than I am with the bonuses themselves. The bonuses were WRITTEN INTO THE STIMULUS!

Yes, the one nobody had time to read before it was railroaded through Congress.

aren't the AIG bonuses bailout money?

reply to post by ModernAcademia


They are using bailout money to pay for the bonuses, yes. The administration is "expressing outrage" that bailout money is being used for bonuses to execs. They are trying to make it sound like they didn't know it was going to be used for bonuses. Government (taxpayer) money should never be used to enrich individuals.

[edit on 19/3/2009 by Iamonlyhuman]

Well, folks, there's another major scandal coming out of this bailout mess. Apparently, several of these companies receiving bailout funds were delinquent on their federal income taxes...to the tune of $220 million.

At a separate oversight hearing in Congress yesterday that is focused on the TARP program, Rep. John Lewis (D-Ga.) said a review of tax records of 23 companies that received bailout funds showed 13 of those firms owe more than $220 million in unpaid federal taxes.

Its at the bottom of the article on page 1.

This entire bailout scheme is turning into one of the biggest fiscal scandals in US government history. And just think...some people want these buffoons running your healthcare system.






[edit on 19-3-2009 by vor78]

But, as discussed in the other thread, Obama will come out unscathed in all of this. God forbid the messiah gets his suit dirty.