Posted by Scott Malensek on 19 March, 2009 at 6:42 am. 20 comments already!

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.

This claim is not sitting well with Democrats.

“I’m sick and tired of hearing the administration and the Secretary of the Treasury say, ‘I just found out about it,’ ” Rep. Paul E. Kanjorski (D-Pa.) said yesterday.

The Washington Post points out that Obama’s Treasury Secretary’s in fact knew about the bonuses months ago.

AIG officials met with Geithner and then Treasury Secretary Henry M. Paulson Jr. in New York on Sept. 14 to warn them of the dire threat posed by the derivative business developed by AIG’s Financial Products unit. Executives told the two men the firm needed help but had at least a week before it faced collapse, sources said. Paulson left for Washington. But Geithner stayed up all night with officials at the New York Fed to examine AIG’s situation. He discovered not only an enormous number of complicated trades, estimated at $2 trillion, but that AIG had backed retirements funds across the nation. He also realized that a collapse of AIG was imminent, and that the fallout would ripple across the banking system, sources familiar with the episode said.

The Washington Post cites multiple sources including the corroboration from the Treasury Dept’s own PR people.

While declining to answer questions about the AIG bonuses, Fed spokeswoman Michelle Smith said in a statement: “The Fed and Treasury officials have coordinated closely on all aspects of the U.S. government’s support for AIG during this extraordinary period.”

The Fed officials did not anticipate the political firestorm that would erupt over the bonuses, a senior government official said. “They clearly underestimated the matter,” the source said.

And so it is that even the far left Code Pink wackos are calling for the Treasury Secretary’s resignation or removal. Sadly, President Obama has so far broken his campaign promise to CHANGE the way Washington works, and instead he’s standing by his man for no other reason and with no other fallout other than having to own up to his mistake in hiring a tax cheat to run the IRS.

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