Probes Begin in Treasury-AIG Bonus Mess
Which officials knew what, when, how -- and what did they do about it?
March 19, 2009— -- The Treasury Department's top watchdog is investigating what role Treasury officials at all levels played in AIG's decision to award over $160 million to employees of its cataclysmically failed Financial Products division, sources say.
Treasury officials and particularly Secretary Timothy Geithner have faced questions and criticisms over what they knew of the bonus program and what actions they took, or didn't take, to prevent it.
The investigation by Treasury Inspector General Eric Thorson is one of several official probes into the AIG bonus fiasco.
At a House hearing Thursday, Neil Barofsky, the Special Inspector General for Treasury's Troubled Asset Relief Program, announced he was launching his own audit. It will examine who in the Federal government "knew what, how, when and why" about AIG's bonus program, Barofsky said.
He will also scrutinize AIG's employment contracts, and look at how government officials monitored and enforced executive compensation at bailed-out companies. New York Attorney General Andrew Cuomo has also been investigating AIG's bonus payouts.
Obama: 'Complete Confidence' in Geithner
Seeking to quell the furor over how Geithner and other administration officials have handled the situation, President Obama yesterday said he has "complete confidence in Tim Geithner and my entire economic team," and that he believed Geithner has made "all the right moves" in handling AIG.
The investigation by Treasury Inspector General Eric Thorson will examine what Treasury officials knew of AIG's "retention payment" plans for its Financial Products division, when they knew it, and what actions they took.
Thorson's probe was requested by Sen. Charles Grassley (R-IA). "As it appears that the [Treasury] Department's Office of General Counsel and others, were largely involved in these matters, I believe it is appropriate that you obtain the information I am seeking," Grassley wrote in his letter yesterday asking for an investigation. Thorson's office did not respond to requests for comment.
Public Outrage Over AIG Bonuses
AIG's Financial Products unit lost billions for the company, forcing its collapse and a taxpayer-funded $170 billion bailout. News that the unit's employees had received millions in incentive pay has unleashed a days-long storm of public outrage that has pounded the Obama administration, the company and its employees.
Treasury officials reportedly knew of the bonus plan since last fall, although the Obama administration has said Geithner first learned of the program last Tuesday, March 10.
AIG disclosed the plan in public filings, and the Federal Reserve – which oversees AIG's corporate governance under the terms of the bailout – has confirmed that Treasury was informed of the "retention payment" program last fall.
Moreover, Treasury officials intervened in Congressional deliberations this February. Sen. Christopher Dodd (D-CT) says Treasury officials pressed him to water down a proposed amendment that would have stripped employees of bailed-out companies like AIG of bonuses they had already received.
An administration official disputed Dodd's version of events, saying they merely raised legal concerns that the amendment could spark litigation.
AIG Says Bonuses a Sound Business Decision
Last Wednesday, Geithner reportedly called AIG chairman Edward Liddy, outraged, saying the payments were unacceptable and insisting they be stopped. The company has said it was contractually obligated to make the payments, and that it was a sound business decision to do so.
In comments yesterday, President Obama appeared to take responsibility for allowing the bonuses to go through. "Listen, I'll take responsibility. I'm the president," he said at a town meeting in Costa Mesa, Calif. He noted that "we didn't draft these contracts," but said, "it's my job to make sure we fix these messes, even if I don't make 'em."
Jonathan Karl and Jake Tapper contributed to this report.