Time magazine: Treasury knew about AIG bonuses 10 days sooner than thought

Only three possibilities here. One: Geithner found out about the bonuses as soon as his staff did and lied about it to Congress. Two: Geithner told Congress the truth but, thanks to the understaffing crisis at Treasury, it now takes 10 days for politically important matters to trickle up to the secretary’s desk. Three: Geithner told the truth and there’s no understaffing crisis, but his staff’s so incompetent that they didn’t realize this was a priority when they found out.

Which of the three is most worrisome?

Though Treasury Secretary Timothy Geithner told Congressional leaders Tuesday he only learned of the impending $160 million bonus payments to members of AIG’s troubled financial products unit March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on February 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.

“Treasury staff was informed about the new bonuses in a Feb. 28 memo that the March 15 [bonus payment] date was upcoming,” a Federal Reserve source tells Time. A Treasury department source, speaking on background, confirms the e-mail memo and its contents, and says further, “Everybody knew that [AIG] had a retention issue.”…

The Treasury department official says the fault appears to lie with career staffers at the department, who failed to report the imminent bonus deadline up the chain to Geithner. This failure may be a by-product of the difficulty he has had staffing up at Treasury. But Geithner still has some personal vulnerability on the issue. It was he, as head of the New York Federal Reserve, who negotiated the AIG bailout last September. At that time, he could have sought to get bonuses repealed as part of the massive government loan.

Time claims the memo from the New York Fed on February 28 went so far as to emphasize that the bonuses were a hot-button issue — and still, no action in D.C. for 10 days. Meanwhile, via Tom Maguire, a nugget from today’s hearing points toward theory one, i.e. that Geithner might indeed have lied. Quote:

1:47: Rep. Scott Garrett (R., N.J.) asks more about the timeline. Liddy said that talking last week to Tim Geithner, the Treasury secretary, Geithner indicated he learned about the bonus issue the prior week. That appears to conflict with the timeline put forth by the Obama administration, saying Geithner only learned last Tuesday (March 10).

Exit question: Is this the last straw for TurboTax Tim? Heart-ache.