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Treasury said to be unprepared on AIG bonus plans

• Yahoo

Neil Barofsky, the special inspector general for the $700 billion financial rescue program, will answer questions about a new report outlining the official missteps that led to massive bonus payments for executives at insurer American International Group Inc.

In a report released Tuesday, Barofsky wrote that the Treasury Department did not understand AIG's byzantine pay structures when it gave the firm billions in aid last fall. The government has committed a total of more than $180 billion to wind down the New York-based insurance and financial services conglomerate, and now owns about 80 percent of the company.

AIG's bonuses sparked a political firestorm earlier this year when it was revealed that the government could not legally stop AIG from paying millions in bonuses even after taking billions in bailout money.

Barofsky's appearance is expected to recall testimony in March by Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York when AIG first was bailed out. The Federal Reserveprovided AIG's first lifeline.

Geithner said at the time he had not known about nearly $1.75 billion in bonuses, retention payments anddeferred compensation that AIG was contractually obligated to pay its workers. Millions went to employees in the unit whose bets helped sink the company.


Barofsky found no evidence that Geithner knew about the payments before March. But he wrote that it was a "failure of communication" for the top executive of the agencies overseeing AIG to be unaware of the payments.

AIG has asked employees to return some of the money voluntarily.

The report also said the Obama administration's pay czar has asked American International Group to withhold some of the millions in bonuses promised to its employees. Kenneth Feinberg, the special master forexecutive compensation, "has informally advised AIG not to pay the full $198 million" employees expect to receive, the report said.

Feinberg is locked in negotiations with the seven companies that received the most expensive taxpayer bailouts. AIG's was by far the largest. To secure its bailouts, AIG argued to Treasury that its failure would doom the broader financial system.

It took officials from the Federal Reserve Bank of New York months to untangle AIG's "staggeringly complex, decentralized" compensation structure, the report says. They eventually discovered 620 bonus programs totaling $455 million, and 13 retention plans allocating $1 billion.

The company is talking to Feinberg about matters "including future payments to employees of AIG Financial Products," spokeswoman Christina Pretto said in a statement. Employees have until the end of the year to return voluntarily some of the bonus pay they received in March, she added.

(Lori adds WHY IS IT PROPAGANDA? Treasury including geithner knew all about these bonus's!  Remember that fake outrage from obama in the spring? Remember how he told the banks the only thing keeping them from citizens with pitchforks was him?  What a show obama puts on some might say it's the greatest show on Earth.)
Treasury’s failure to discover the scope and scale of AIG’s executive compensation obligations, in particular at AIGFP, potentially resulted in a missed opportunity to avoid the explosively controversial events and created considerable public and congressional concern over the retention payments,” the report found.
News that support staff shared $168m-plus worth of retention awards could undermine AIG’s insistence the bonuses were needed to persuade key employees to stay on and unwind the derivatives trades that almost brought down the insurer last year.
After all, when AIG imploded in September 2008, the potential losses on its credit derivatives contracts were so devastating for the system, because they were so concentrated, that the US government used tens of billions of dollars to honour the deals, benefiting groups such as Goldman Sachs, Société Générale and Barclays. And that money, remember, will not return to the Treasury’s purse (unlike the sums invested to boost bank capital, say).

More proof that Barack Hussein Obama, aka George Bush II, and his Treasury Secretary Tiny Tim Geithner knew about the multi-million dollar AIG bonusesf or months before giving AIG another $30 billion in federal aid just two weeks ago!

Oh, and before we forget, Obama received his own $101,322 “bonus” check from AIG.


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