The US government's chief overseer of bank bailout funds announced Thursday a probe into the Treasury's handling of hugely controversial bonuses paid by bailed-out insurer AIG.
The announcement by Neil Barofsky, the special inspector-general of the Troubled Asset Relief Program, turned up the political heat on Treasury Secretary Timothy Geithner amid Republican calls for his resignation.
In testimony to the House Ways and Means subcommittee on oversight, Barofsky said he would "act aggressively to recover the taxpayer's money" if wrongdoing is found at American International Group itself.
"We're launching an audit that, as part of a larger review of executive compensation practices, will include a thorough review of the process through which Treasury decided to authorize and approve such payments," he said.
The probe will cover "who knew what, how, when and why," he said, arguing that a November agreement between the Treasury and AIG "included specific reference (to) retention payments."
Barofsky said he was also cooperating 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.
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 government's 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 AIG's legal or contractual obligations," he said.
"And if there are any inconsistencies, we will act aggressively to recover the taxpayer's 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 shouldn't have been in that position, but it's my responsibility and I accept that."
Source: AFP American Edition
