WASHINGTON -- The pitched drama over bonuses for bailed-out executives will be revived on Capitol Hill Wednesday as a government watchdog explains how some executives nearly brought down the financial system -- then pocketed millions.
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 Reserve provided AIG's first lifeline.
Geithner said at the time he had not known about nearly $1.75 billion in bonuses, retention payments and deferred 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. - FOX News Story
The Democrats will undoubtedly blame this one on Bush. It happened before Obama was in office. However they better choose their words carefully. It is Obama's top guy over the Treasury that was actually in charge when this all went down and he conveniently didn't know about it?
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