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Treasury Dispute with Bailout Watchdog Stems from AIG Bonus Audit; Now Congressman Calls For Investigation
June 19, 2009 3:22 PM
ABC News’ Matt Jaffe reports from Washington: The Treasury Department’s ongoing dispute with bailout watchdog Neil Barofsky stems from the Obama administration’s refusal in April to hand over documents relating to AIG’s executive compensation structure, ABC News has learned from a source familiar with the situation.
The insurance giant, the recipient of a record $180 billion in taxpayer aid, ignited an uproar in March when the company paid out $165 million to employees as part of a retention program. The bonus mess caused a firestorm for the administration, with Treasury Secretary Tim Geithner rebuffing calls by Republican lawmakers for his resignation.
On March 19, Barofsky, as the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), announced he was launching an audit into the AIG fiasco. But when the watchdog went to Treasury to get documents on AIG, the Department initially refused to provide them.
Earlier this week Treasury revealed that this dispute with Barofsky prompted them to seek a legal opinion from the Justice Department’s Office of Legal Counsel on SIGTARP’s independence from Treasury.
In an unredacted April 7 memo released by Treasury, Barofsky, in response to an earlier Department memo, had written, “You advised that you desire OLC’s opinion about: (1) whether SIGTARP exists within the Department of the Treasury; (2) whether the Secretary of the Treasury has supervisory authority with respect to SIGTARP; and (3) assuming the answer to the first question is in the negative, whether providing Treasury’s attorney-client privileged materials to SIGTARP effectively waives the privilege.”
Argued Barofsky, “SIGTARP believes that the Emergency Economic Stability Act of 2008 (EESA)…provides that SIGTARP is an independent entity within Treasury, that SIGTARP is not subject to the Secretary’s supervision, and that attorney-client privilege is not a bar to SIGTARP’s access to Treasury’s records or information.”
Now one Treasury watchdog needs to come to another one’s aid, according to the Congressional Oversight Panel’s Jeb Hensarling.
The lone sitting Republican member of Congress on the panel today called on COP chair Elizabeth Warren to launch an immediate investigation into Treasury’s dispute with SIGTARP.
“It is my understanding that this disagreement has evolved into a debate between the Administration and SIGTARP as to whether SIGTARP is subject to the control and supervision of the Administration,” Hensarling wrote in a letter to Warren first obtained by ABC News. “Any threat or appearance of a threat to SIGTARP’s independence will undermine and corrupt its important mission. SIGTARP must be given free and open access to all TARP related documents and other materials held by or accessible to the Administration.”
“I strongly encourage the panel to promptly investigate these troubling reports and to report its findings to the American taxpayers,” he urged.
In an interview Thursday with ABC News, Hensarling had first called for a COP investigation, saying the administration’s conduct with IGs brought back shades of the Nixon regime after President Obama last week fired Gerard Walpin as IG for the Corporation for National and Community Service.
The Texas lawmaker said Barofsky had been “gagged” by Treasury in an “unprecedented”, “irregular”, and “disturbing” action.
“Such actions,” Hensarling noted in today’s letter to Warren, “also threaten the effectiveness of the Congressional Oversight Panel in its duty to promote taxpayer accountability and transparency in the Troubled Asset Relief Program.”
Last spring, the AIG bonus mess enraged taxpayers and lawmakers alike. In announcing his audit on March 19 before a House committee, Barofsky said the probe would examine who in the federal government “knew what, how, when, and why” about the insurance giant’s bonus program.
Geithner, facing questions about his knowledge of AIG’s executive compensation structure, explained to CNN in a March 19 interview that he had only found about the “full scale” of the bonuses on March 10, just days before they were paid out.
“On Tuesday I was informed about the full scale and scope of these specific bonus problems,” Geithner told CNN’s Ali Velshi. “And again, as soon as I did -- but you know, it's my responsibility, I was in a position where I didn't know about those sooner. I take full responsibility for that.”
“As soon as I heard about the full scale of these things, we moved very actively to explore every possible avenue -- legal avenue to address this problem, to make sure that, again, the assistance we were providing was not going to unduly benefit these people,” he said.
Earlier this week, Sen. Chuck Grassley, R-Iowa, wrote to Geithner expressing concern about the dispute with SIGTARP.
Grassley told ABC News Thursday that on top of “a lack of accountability” for the $700 billion bailout program, “it’s added injury to hear about the Treasury Department putting up hurdles to slow down the work of the watchdog who’s supposed to track the money. One of the biggest lessons of the last year is that the public deserves more transparency and, in turn, accountability from New York and Washington.”
Treasury spokesman Andrew Williams has said that Barofsky did not object to the DOJ request and submitted his own legal analysis to the agency. Williams also said that “no documents have been withheld from the SIGTARP based on the attorney-client privilege” and that “all documents requested by the SIGTARP have been produced to date”. However, he did not say that no documents have ever been withheld from the watchdog.
“It begs the question,” Hensarling said Thursday, “what do they have to hide?”
-Matt Jaffe
June 19, 2009 | Permalink | Share | User Comments (21)
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danita; Are you kidding me? The very next sentence in the story says, "However, he (the Treasury spokesman Andrew Williams) did not say that no documents have ever been withheld from the watchdog". (SIGTARP)
Posted by: LongT | Jun 21, 2009 3:43:44 PM
BUY STOCKS and get RICH with the GOVERNMENT-funded WALL STREET boys!! Stocks have blown UP 40% in just the past three months!
Posted by: tricia | Jun 21, 2009 1:45:10 PM
"Transparency" has zero visibility at three key locations 1)Federal Reserve
2)Treasury 3)Wall Street Financial Institutions.
Posted by: Karin | Jun 21, 2009 1:18:27 PM
President Barack Obama does something the President cannot do -- fire an Inspector General of Americorps without giving 30 days notice or giving Congress the details as to why. To make matters worse, it appears as if President Obama fired the IG because he was probing some possible fraud with one of Obama's close friends, Kevin Johnson.
Posted by: deanbob | Jun 20, 2009 5:09:24 PM
The Tax Cheat is a liar. He knew about and approved of the bonus's last fall. If this administration was investigated, they would be run out of town on a rail!! Richard Nixon looks like a choir boy in comparison.
Posted by: Sunnyr | Jun 20, 2009 3:17:55 PM
How long was the delay while the jurisdiction was checked? It couldn't have been long for crying out loud . . .
Danita,
That is not the point, the point is WHY was there ANY delay!
This topic has been a hot one since TARP was passed. This is hardly a "surprise". I will say this again. READ THE LAW!
IT is VERY specific about the relationship between the IG and the Treasury. The isea htey wanted "clarification" tells you that something is going on! Is there anyone else questioning anything about the authority of the IG to get what he asks for...
WHY is the treasury looking for this "clarification"... THE LAW IS VERY SPECIFIC! There is no reason for Treasury to be "questioning" anything at all on this!
Posted by: Mike_C | Jun 20, 2009 3:11:27 PM
Nobody is allowed to look under the TARP that COVERS Wall Street - whether it is Neil Barofsky or Prof. Elizabeth Warren, the story is the same. Nobody outside the circle of the Fed and the Treasury and the Wall Street banks, is allowed to even peek underneath the giant TARP. One thing I can guarantee, is that if the American People knew what was going on under the cover of the TARP, all heck would break loose. Geithner and Bernanke know this and are highly motivated to hide what's going on underneath the TARP.
Posted by: Rachelle | Jun 20, 2009 9:28:25 AM
Nixon fired Archibald Cox when he got too close to the truth- just like Obama is doing now.
Posted by: drjohn | Jun 20, 2009 8:27:54 AM
Good grief it looks like you're firing off your hat over very little here . . . a very slight delay
Posted by: danita | Jun 20, 2009 2:43:41 AM
Mike C . . .
How long was the delay while the jurisdiction was checked? It couldn't have been long for crying out loud . . .
Like this information was delayed in the courts for years? I don't think so . .. it was forthcoming in a very short length of time, was it not?
Posted by: danita | Jun 20, 2009 2:41:24 AM
"A request for documents comes in, the legality of the request and A request for documents comes in, the legality of the request and jurisdiction is double-checked, and the documents are released . . . where exactly is the problem here?
is double-checked, and the documents are released . . . where exactly is the problem here?"
Very Simple...The legality & jurisdiction is written into the LAW! There is absolutely no need whatsoever to be checking anything. If Treasury had any issues with this, they should have been brought up long before this occurred!
READ THE LAW! It is out there online & extremely clear on this point!
Posted by: Mike_C | Jun 20, 2009 1:10:43 AM
LongT how could it be stonewalling? I don't get that . .
The article states “all documents requested by the SIGTARP have been produced".
So that means ALL the documents requested by the Inspector General were provided to the Inspector General.
Posted by: danita | Jun 19, 2009 11:36:23 PM
Sounds like stonewalling to me.
Posted by: LongT | Jun 19, 2009 9:42:48 PM
“no documents have been withheld from the SIGTARP based on the attorney-client privilege” and “all documents requested by the SIGTARP have been produced to date”
------------------------------------------
A request for documents comes in, the legality of the request and jurisdiction is double-checked, and the documents are released . . . where exactly is the problem here?
Posted by: danita | Jun 19, 2009 8:29:29 PM
Geithner comes from the Federal Reserve Bank of New York. The Fed is the antithesis of "transparent". Tim Geithner has no interest in transparency. TARP is a giant COVER for Wall Street and he does not want us to see what's under that TARP. Geithner is a scary man, who lulls us with his boy scout looks. Beware.
Posted by: karen | Jun 19, 2009 6:22:29 PM
The Obama administration must be consulting (Enron's) Andy Fastow on how to hide transactions. They obviously learn fast.
Posted by: slk | Jun 19, 2009 5:55:28 PM
Here's an older IG tidbit that appears to tie into the AIG problems:
"Rep. Alan Grayson asks the Federal Reserve Inspector General about the trillions of dollars lent or spent by the Federal Reserve and where it went, and the trillions of off balance sheet obligations. Inspector General Elizabeth Coleman responds that the IG does not know and is not tracking where this money is."
Seems this IG is absolutely clueless about where taxpayer monies are going. You can see the video of the meeting at You Tube title: Alan Grayson: Is Anyone Minding the Store at the Federal Reserve?
Bloomberg is mentioned in the video and you can see the latest news article: Fed Refuses to Release Bank Data, Insists on Secrecy (March 5)
Snippets:
Fed Vice Chairman Donald Kohn told the Senate panel today that revealing the names of AIG’s counter parties would make companies less likely to do business with any recipient of government aid, risking further turmoil at the insurer and financial markets.
Kohn said the Fed wouldn’t reveal the counterparties in Maiden Lane III, a company formed by the central bank to purchase collateralized debt obligations on which AIG’s financial products unit had written credit-default swaps.
The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank’s loans don’t have the oversight safeguards that Congress imposed upon the TARP
Posted by: Ordinary Sadie | Jun 19, 2009 5:47:29 PM
Not understanding in combo with this report and the IG's firing why it is that the Obama administration does not want to work with these watchdog groups whose job is to oversee all funds accountable to American taxpayers but set up something independently. So yes it begs the question, what are they hiding?
Posted by: teena | Jun 19, 2009 5:38:58 PM
Thanks for the report, Matt.
Posted by: MayBee | Jun 19, 2009 4:14:33 PM
yeah, that whole transparency thing isn't working out so well...is it?
Posted by: Mike_C | Jun 19, 2009 4:14:22 PM
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