Geithner Blamed for AIG Bonus Fiasco

Remember those big bonuses for AIG employees that caused such a ruckus? Timothy Geithner’s fault.

Well, not entirely. His predecessor at the Treasury, Henry Paulson, bears some of the responsibility for the bonus debacle, bailout watchdog Neil Barofsky said Wednesday.

But Geithner led agencies that should have been monitoring the insurer that’s 80 percent owned by the government, so he is “ultimately responsible” for the bonuses that caught the government by surprise this spring.

Geithner, as New York Fed chief, helped lead efforts to pump money into the failing insurer to keep it from failing. The Treasury, under then-Secretary Henry Paulson, came in for criticism, too, for “outsourcing” oversight of AIG to the Fed. The Fed didn’t think of the bonuses as a big deal because they were such a small part of the overall aid package.

The government pumped more than $180 billion into AIG to keep it afloat.

There were 620 bonus programs totaling $455 million. There were another 13 retention-bonus programs totaling $1 billion.

Geithner has said he learned of the bonuses in March, after he became Treasury Secretary, and that there was little the government could do to stop their payment, because the company was contractually obligated to shell out.

The Treasury Secretary “failed to know what he should have known, failed to do what he should have done, and failed to give us transparency,” the Associated Press quotes Representative Darrell Issa, Republican of California, as saying.