NY Times disappears Bush Treasury Department from article on AIG bonuses

In a March 17 article about the Obama administration's "effort to undo bonuses at A.I.G.," The New York Times reported, "The Treasury and Federal Reserve officials said they had known about the bonus program as far back as last fall." But at no point in the article did reporters Edmund L. Andrews and Jackie Calmes note that the Treasury Department at the time was then-President Bush's Treasury Department. Indeed, the article did not mention Bush or his Treasury Secretary Hank Paulson at all, much less report that the Bush Treasury Department worked with the Federal Reserve in carrying out last year's bailouts and bought AIG stocks notwithstanding the existence of these bonus contracts.

The Times reported, "President Obama and his top economic advisers scrambled to calm a nationwide furor on Monday over bonuses paid at the American International Group, even as administration officials acknowledged they had known about the issue for months." The Times further reported:

For all of the furor since details of the bonuses became public over the last several days, the issue of retention payments to A.I.G. employees globally has been percolating publicly since A.I.G. was bailed out in mid-September. About $1 billion in retention payments for 2008 and 2009 are in question, but the controversy involves about half of that, about $450 million over two years, that was intended for employees of A.I.G.'s financial products unit. That unit was the source of the financial derivatives blamed for the near-collapse at the heart of the economy's downturn.

The Treasury and Federal Reserve officials said they had known about the bonus program as far back as last fall. The program has provoked public protests from a handful of critics and at least one Democratic lawmaker in Congress -- Representative Elijah E. Cummings of Maryland, a member of the House Committee on Government Oversight, who demanded without success in December that A.I.G. provide information about the bonuses.

But in reporting that federal officials knew of the bonus programs as early as fall 2008, the Times failed to make the connection to the Bush administration, which negotiated bailouts with AIG, even with the retention bonuses in place.

Reporting on the September 16 bailout of AIG, The New York Times stated in a September 17, 2008, article: "Fearing a financial crisis worldwide, the Federal Reserve reversed course on Tuesday and agreed to an $85 billion bailout that would give the government control of the troubled insurance giant American International Group." The Times continued:

The decision, only two weeks after the Treasury took over the federally chartered mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank's history.

With time running out after A.I.G. failed to get a bank loan to avoid bankruptcy, Treasury Secretary Henry M. Paulson Jr. and the Fed chairman, Ben S. Bernanke, convened a meeting with House and Senate leaders on Capitol Hill about 6:30 p.m. Tuesday to explain the rescue plan. They emerged just after 7:30 p.m. with Mr. Paulson and Mr. Bernanke looking grim, but with top lawmakers initially expressing support for the plan. But the bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by A.I.G. and other institutions it does business with.

A September 18, 2008, New York Times article further reported on the Bush administration's role in bailing out AIG, a role ignored in the Times' March 17 article:

The first call from the Treasury Secretary Henry M. Paulson Jr. came at 3:30 p.m. Tuesday, and the message was innocuous, to avoid setting off alarms. And when he finally got through to the Senate majority leader, Harry Reid of Nevada, Mr. Paulson simply said he wanted to brief Congressional leaders ''about recent developments on the economy.''

In fact, Mr. Paulson -- along with the Federal Reserve chairman, Ben S. Bernanke -- would deliver stunning news that would reverberate throughout markets worldwide and leave top lawmakers ''petrified,'' in the words of a senior aide.

A frenzied effort to prop up the American International Group, the ailing insurance giant, had failed. The Fed had decided it had no choice but to do the unthinkable: bail out A.I.G. with an $85 billion loan or risk a potential financial catastrophe of unknown proportions.

Over the preceding five days, A.I.G., the world's largest insurance company, had exhausted every other option. The company had sought a lifeline from some of the nation's largest banks, as well as from big private investment funds on Wall Street, but no one dared come to the rescue. As potential saviors pored over A.I.G.'s books, the holes they discovered kept growing -- first from $20 billion, then to $40 billion, then to $80 billion, then even more. The sharpest minds on Wall Street could not fathom where the bottom was.

Further, in a November 10, 2008, article, the Times reported that the Bush Treasury Department and Federal Reserve announced a "revised bailout" of AIG, under which "the Treasury Department will use the Troubled Asset Relief Program, the $700 billion financial system rescue plan, to buy $40 billion of newly issued A.I.G. preferred shares." From the November 10 article:

The federal government announced on Monday an overhaul of its bailout of the insurance giant American International Group, saying it would purchase $40 billion of the company's stock, after signs that the initial bailout was putting too much strain on the company.

In a joint statement, the Federal Reserve and the Treasury said the move was necessary "to keep the company strong and facilitate its ability to complete its restructuring process successfully." The new measures, they said, would help the company and promote market stability while protecting the interests of the federal government and taxpayers.

A.I.G. reported a loss on Monday of $24.47 billion, or $9.05 a share, in the third quarter, after a profit of $3.09 billion, or $1.19 a share, a year ago. The results included pretax losses of $18.31 billion from the declining value of A.I.G.'s investments.

Neel T. Kashkari, the assistant secretary of the Treasury who heads the Office of Financial Stability, said in a speech Monday morning that the new A.I.G. plan "was necessary to maintain the stability of our financial system."

A.I.G. shares were 8 percent higher, to $2.28 near the close of trading Monday. In the revised bailout, the Treasury Department will use the Troubled Asset Relief Program, the $700 billion financial system rescue plan, to buy $40 billion of newly issued A.I.G. preferred shares.

The government created an $85 billion emergency credit line in September to keep A.I.G. from toppling and added $38 billion more in early October when it became clear that the original amount was not enough. As part of the revision, the Federal Reserve said it would reduce that credit line to $60 billion.

From the March 17 New York Times article:

For all of the furor since details of the bonuses became public over the last several days, the issue of retention payments to A.I.G. employees globally has been percolating publicly since A.I.G. was bailed out in mid-September. About $1 billion in retention payments for 2008 and 2009 are in question, but the controversy involves about half of that, about $450 million over two years, that was intended for employees of A.I.G.'s financial products unit. That unit was the source of the financial derivatives blamed for the near-collapse at the heart of the economy's downturn.

The Treasury and Federal Reserve officials said they had known about the bonus program as far back as last fall. The program has provoked public protests from a handful of critics and at least one Democratic lawmaker in Congress -- Representative Elijah E. Cummings of Maryland, a member of the House Committee on Government Oversight, who demanded without success in December that A.I.G. provide information about the bonuses.

[...]

But administration officials said that the Treasury secretary, Timothy F. Geithner, did not personally become aware until last week that an even bigger round of payments was due on March 15. Administration officials said Mr. Geithner learned of the deadline early last week, when the Federal Reserve Bank of New York alerted him that the bonus payments were coming due.

Mr. Geithner, according to Treasury officials, insisted that the bonus plan was "unacceptable" and called Mr. Liddy on Wednesday to demand changes.