Actually, the outrage here may be that the Washington Post considers this a journalistic scoop — and that they’re probably right. David Cho and Brady Dennis dutifully report that the New York Fed knew about the AIG bonuses in the fall of 2008, but sat on the information for months. They informed the Obama administration in late February, though, well before they and Congress feigned shock, shock over contractually-obligated retention bonuses:
Documents show that senior officials at the Federal Reserve Bank of New York received details about the bonuses more than five months before the firestorm erupted and were deeply engaged with AIG as well as outside lawyers, auditors and public relations firms about the potential controversy. But the New York Fed did not raise the alarm with the Obama administration until the end of February.
Timothy F. Geithner, who became Treasury secretary early this year, was the head of the New York Fed when it became aware of the bonus details. But his name is not among those of senior New York Fed officials mentioned in the summaries of phone calls, correspondence and other documents obtained by The Washington Post.
Those documents also illuminate who in the government, beyond the New York Fed, knew what about the bonuses at AIG’s most troubled unit, and when.
Key members of Congress began investigating the payments as long ago as October and, beginning in January, repeatedly warned the Treasury about the matter.
In early February, Fed officials in New York sent details about the bonus program to their counterparts at the Federal Reserve in Washington, to prepare Chairman Ben S. Bernanke in case he was asked about the payments at a congressional hearing.
By the time the Obama administration was fully engaged in early March, the New York Fed had determined that AIG was legally bound to pay the bonuses to its Financial Products division, the documents show. Top New York Fed officials also huddled with AIG about developing a strategy to mollify angry lawmakers — but that did little to quell the firestorm that ensued.
Cho and Dennis do some fine reporting here, quite in-depth and detailed, and the article deserves a thorough reading. However, only the details of this are new, as many of us in the blogosphere have already established through public records that Congress and the administration knew about these bonuses long before they made a pretense of outrage over AIG meeting its contractual obligations.
Take one example. The Post notes that Congress had knowledge of the compensation plans as early as last October. That shouldn’t exactly be news; AIG published its compensation plans in November, in its annual report, accessible here, as they do every year. If the administration and Congress had done even the most rudimentary due diligence on AIG before throwing $150 billion at them in bailout cash, they would have known about it from the beginning — and apparently everyone did.
In fact, the Post notes that Rep. Jerry Crowley took a special interest in the bonuses last fall, and pressed for answers on whether they could be stopped. Treasury looked long and hard at the issue and concluded early this year that AIG was bound by its contracts to pay them. That didn’t stop Crowley from grilling Treasury Secretary Tim Geithner in a House committee hearing nine days before the Obama administration feigned shock and outrage over bonuses they themselves had reluctantly blessed:
Thank you, Mr. Chairman. Welcome to the committee, Mr. Geithner, and thank you for your responses so far. It never ceases to amaze me the level of apparent amnesia some of my colleagues on the other side of the aisle have had about how we got to this problem in the first place, and I thank you for answering Mr. Heller’s question in particular. By the line of questioning, you’re almost led to believe that because of a last month and a few days of a presidency we had the problem we have today, and thank you for setting the record straight. This didn’t happen overnight. This took eight years in the making of stagnant, at best, growth.
But yesterday, Mr. Secretary, the Treasury and the Federal Reserve announced a new fourth plan to rescue troubled financial services giant AIG. I do agree that AIG’s sustainability is the lynchpin for some of our recovery efforts, and it’s important for the federal government to work to keep it afloat. However, I must demand that AIG increase the accountability and transparency, something that was not done during the previous administration.
For example, just last month, AIG paid 343 employees of AIG FP — their Financial Products division that created the financial hole that AIG is in, and in turn a multibillion-dollar bill for American taxpayers — $56 million in bonuses and are slated to pay an additional $162 million in bonuses to 393 participants in the coming weeks. And there’s more. Further bonus payments totaling approximately 230 million (dollars) are due to 407 participants at AIG’s Financial Products division in March 2010. This makes no sense to my constituency.
All of this has been known for the past two months. The Post’s article gives some solid background, but really doesn’t break the news that the Obama administration, Treasury, and Congress all lied in order to demagogue on a populist platform and enrage “pitchfork America”. However, few news media outlets have been willing to report that — and for that, the Post should be congratulated for getting the scoop on most of its colleagues.