N.Y. Fed Wanted AIG Bonuses Yanked

NY Fed concerned a public relations nightmare

An attorney for the New York Federal Reserve tried to convince AIG to renege on a million-dollar bonus for a top executive, concerned about how the public would view such a cash reward for a company that received a taxpayer bailout.

Marshall Huebner, an attorney in private practice working for the Fed, wrote in an email that it was “very bad timing” to file an Securities and Exchange Commission report that showed AIG executive David Herzog having received upwards of a $1 million bonus. Huebner worried that this would be revealed “just before [then-Treasury Secretary Hank Paulson] and the [Federal Reserve Chairman Ben Bernanke] go before [House Energy and Commerce Chairman Henry] Waxman, right as the other TARPeys are announcing zero bonuses,” according to an e-mail subpoenaed by the House Oversight and Government Reform Committee and obtained by POLITICO.

Huebner, according to the Nov. 17, 2008 email, asked three New York Fed officials and a Treasury employee if there was “any chance” to get Herzog’s compensation “unagreed to” so it would not be reflected on a public disclosure form. The e-mail did signal, however, AIG was planning to “fundamentally redirect on retention and annual bonuses.”

The House Oversight and Government Reform committee Wednesday will hold a hearing on the New York Fed’s involvement in AIG’s fully paying out pricey insurance contracts to big banks after receiving a government bailout.

Lawmakers have accused Fed officials of attempting to persuade AIG officials to keep the payment of credit-default-swap contracts off their Securities and Exchange Commission filings.

These emails, which have been included in a memo for Republican members for the hearing, seem to show a certain level of influence from the Federal Reserve’s lawyers in disclosing a potentially controversial bonus.

“The means to which the New York Fed has gone to avoid disclosure is reaching ridiculous proportions,” the committee’s top Republican Darrell Issa of California said. “It is very clear that the New York Fed was more concerned with public relations than with disclosing the truth. The more we are learning about the operations at the NYFRB, the more I am wondering why no one within the Fed’s leadership put a stop to this ongoing effort to subvert transparency.”

Copyright POLIT - Politico
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