How the Fed Failed to Tell Obama About The Bonuses (WaPo)

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How the Fed Failed to Tell Obama About The Bonuses
By David Cho and Michael D. Shear
Washington Post Staff Writers
Thursday, March 19, 2009; Page A01

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 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.

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 and are 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 ," Geithner said. "I shouldn't have been in that position, but it's my responsibility and I accept that."

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http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031804210.html