The US governments chief overseer of bank bailout funds announced Thursday a probe into bonuses paid by AIG including what role the Treasury played in approving the payments. The announcement by Neil Barofsky, the special inspector-general of the Troubled Asset Relief Program, could turn up the political heat on under-fire Treasury Secretary Timothy Geithner.
In testimony to the House Ways and Means subcommittee on oversight, Barofsky said he would "act aggressively to recover the taxpayers money" if wrongdoing is found in the bailed-out insurers bonuses. "Preliminary information we have seen indicates that the TARP contract between AIG and Treasury that was entered into back in November specifically contemplated the payment of bonuses and retention payments to AIG employees, including AIGs senior partners," he said.
Barofsky said his office "will be reviewing the process at Treasury with respect to Treasurys decision to authorize and approve such payments, both at the time it entered into the contract with AIG and since that time." Barofsky said he was also co-operating with a separate investigation by New York state Attorney General Andrew Cuomo and with the Department of Justice into "options available to recover taxpayer money."
Republicans on the House of Representatives subcommittee pressed Barofsky on whether Geithner knew of the impending payouts worth 165 million dollars when he approved an extra 30 billion dollars in bailout money for AIG this month.
"The audit that I announced in my opening statement will have the answer to that question, whether he knew," the inspector-general said, vowing that his probe would get to the bottom of "who knew what, when and why." Barofsky, who took office in December to oversee the 700-billion-dollar TARP program, said "I too am frustrated with these very substantial bonuses" given to a company that is only alive today because of a taxpayer rescue. The audit will look more broadly at the governments enforcement of restrictions on executive compensation imposed in return for bailout money, the official said. "As part of this audit, we will be looking closely to ensure bonuses to AIG employees are not inconsistent with AIGs legal or contractual obligations," he said.
"And if there are any inconsistencies, we will act aggressively to recover the taxpayers money." AIG informed the US Federal Reserve three months ago that it would pay the bonuses on March 15, but the Fed failed to notify Treasury or White House officials until the last minute, The Washington Post reported Thursday. "I was stunned when I learned how bad this was on Tuesday (March 10)," Geithner told the Post. "I shouldnt have been in that position, but its my responsibility and I accept that."