Coulda At Least Sent An E-Mail

Front pager of today's WaPo: Helicopter Ben's crew knew about AIG and didn't tell Timmy or the Boss.

Federal Reserve officials knew for months about bonuses at American International Group but failed to tell the Obama administration, according to government and company officials, exposing problems in a relationship that is vital to addressing the financial crisis.

As pressure mounted on AIG employees to return the bonuses, new details emerged yesterday about what the Fed, the Treasury Department and the White House knew regarding the payments and when. AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 to employees working at its most troubled division. The Treasury and White House said they learned of the payments from Fed officials only days before they were due.

So really, Helicopter Ben's the guy we should all be mad at then? Not necessarily...

Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG's impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned "full details" of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG.

"Treasury staff was informed about the new bonuses in a Feb. 28 memo that the March 15 [bonus-payment] date was upcoming," a Federal Reserve source tells TIME. A Treasury Department source, speaking on background, confirmed the e-mail memo and its contents, saying, "Everybody knew that [AIG] had a retention issue."

So Timmy knew for at least a couple of weeks. Lots of finger pointing, lots of not telling the President, lots of egg of faces. Gets worse for Timmy too.

The Treasury Department official says the fault appears to lie with career staffers at the department who failed to report the imminent bonus deadline up the chain to Geithner. This failure may be a by-product of the difficulty Geithner has had staffing up at Treasury. But he still has personal vulnerability on the issue. It was Geithner, as head of the New York Federal Reserve, who negotiated the AIG bailout last September. At that time, he could have sought to get bonuses repealed as part of the massive government loan.

And frankly no matter how you looked at it, Geithner (having negotiated the deal for AIG's bailout including keeping its bonuses) knew exactly what was going down: it was his deal in the first place.

If the e-mail chain shows Geithner knew and then, you know, lied to Congress about it, he's gone. Worst case scenario: Obama pulls a Gonzo and claims executive privilege on Timmy's e-mails, which would drop the President's approval ratings by about a third. Best case scenario, Geithner falls on his sword and Obama follows Oliver Willis's advice:

On the off-chance that does happen, just send a car for Professor Krugman.

In the Kroog we trust.