Fed knew of AIG bonuses, failed to tell Obama

US Federal Reserve officials knew about the controversial AIG bonuses but did not tell Treasury or White House officials for months, the Washington Post reported Thursday.

The American International Group informed the Fed three months ago that it would pay 165 million dollars by March 15 to employees in their Financial Products unit, the Post reported, citing government and company officials.

The bonuses were doled out to the AIG division at the heart of the company's near collapse and whose intricate dealings with banks worldwide helped trigger the global financial crisis.

Treasury Secretary Timothy Geithner told the Post that he had not been aware of the size of the bonuses and the timing of the payments.

"I was stunned when I learned how bad this was on Tuesday [March 10]," Geithner told the Post. "I shouldn't have been in that position, but it's my responsibility and I accept that."

Geithner met with his staff and considered options, but concluded that the government could not change contracts for work that had already been done.

Geithner then briefed a senior White House aide, who informed Obama on March 12, the day before they were paid out, the Post reported.

AIG was saved from bankruptcy with an 85-billion-dollar US government lifeline in September, in which Geithner -- then head of the New York Federal Reserve -- was involved. The bailout has since grown to 180 billion dollars.

The US government rescued the insurance giant because it believes that its intricate web of ties with banks worldwide posed an imminent risk of financial collapse not just for the United States but globally.









Part of Compania Church is reflected in a mirror in Quito, Ecuador, on March 15. REUTERS/Guillermo Granja