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October 14, 2009

Watchdog: Treasury and Fed failed in AIG oversight

WASHINGTON (AP) — Treasury Secretary Timothy Geithner is "ultimately responsible" for regulators failing to rein in massive bonus payments at American International Group because he led the agencies that provided AIG's lifelines.

That's according to Neil Barofsky, the special inspector general for the government's $700 billion financial bailout program.

Geithner, who was president of the Federal Reserve Bank of New York before taking over at Treasury, said he did not learn until March about the $1.75 billion in bonuses and other compensation promised to AIG employees. But Barofsky's report shows officials at the New York Fed learned of the payments in November, when Geithner was still at the bank.

In testimony before the House Committee on Oversight and Government Reform, Barofsky says: "This is a failure of communication and a failure of management."

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