AIG meltdown: Pelosi blames Senate, Treasury blames Fed, nutroots blame White House

Variations on a theme of Democratic disarray: Madam Speaker’s miffed at Dodd for exempting the bonuses in the first place, the nutroots are miffed at Emanuel and Axelrod for dismissing the intensity of America’s outrageously outrageous outrage, and Treasury’s miffed at the Federal Reserve for not giving it any lead time to dodge a political freight train.

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…

The Fed officials did not anticipate the political firestorm that would erupt over the bonuses, a senior government official said. “They clearly underestimated the matter,” the source said.

The downside to this goldmine? The GOP’s obliged, as a simple matter of smart politics, to pile on and demagogue the bonuses too, even though the public’s anger is not only potentially dangerous but might end up being harnessed by the left for counterproductive, wealth-destroying means. It’s a question, I guess, of which side can more effectively exploit their version of the “lesson” here: For Republicans, it’s proof of the folly of bailouts and for Democrats it’s proof that business needs to be more tightly regulated. If ever we needed the party to be on its game message-wise, it’s now.