Washington - US Federal Reserve officials knew about the controversial AIG bonuses but did not tell Treasury or White House officials for months.
The American International Group informed the Fed in November 2008 that it would pay $165 million dollars by March 15 to employees in its Financial Products unit, according to government and company officials.
The bonuses were doled out to the AIG division at the heart of the company's near collapse and whose intricate dealings with banks worldwide helped trigger the global financial crisis.
Treasury Secretary Timothy Geithner said he had not been aware of the size of the bonuses and the timing of the payments.
"I was stunned when I learned how bad this was on March 10," Geithner said. "I shouldn't have been in that position, but it's my responsibility and I accept that."
Geithner met with his staff and considered options, but concluded that the government could not change contracts for work that had already been done.
Geithner then briefed a senior White House aide, who informed Obama on March 12, the day before they were paid out.
AIG was saved from bankruptcy by an $85 billion US government lifeline in September 2008, in which Geithner - then head of the New York Federal Reserve - was involved. The bailout has since grown to $180 billion dollars.
The US government rescued the insurance giant because it believes that its intricate web of ties with banks worldwide posed an imminent risk of financial collapse not just for the United States but globally. - Sapa-AFP