Geithner says responsible for AIG bonus flap

WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner said on Thursday he takes responsibility for the controversy surrounding the payment of bonuses to American International Group employees.

He repeated in an interview on CNN television that he first learned of the bonuses last Tuesday, March 10, and said that if fault was to be assigned for not knowing earlier, then it lay with him.

"On Tuesday I was informed about the full scale and scope of these specific bonus problems," Geithner said. "You know, it's my responsibility, I was in a position where I didn't know about these sooner, I take full responsibility for that."

Geithner has had to absorb some of the lawmaker and public outrage over AIG's payment of $165 million in retention bonuses to employees of the unit that made bad bets on toxic mortgages and credit default swaps, triggering multiple U.S. bailouts now totaling $180 billion.

He dismissed a question about calls for his resignation.

"I think this just comes with the job," Geithner said. "I feel this deep sense of personal responsibility and obligation to work with this president, this Congress, to try to make this economy stronger, to make sure our financial system never goes through this again."

Geithner said every effort will be made to recoup the AIG bonus payments. But he also said the Treasury had worked closely with Christopher Dodd, chairman of the Senate Banking Committee, on crafting legislation that now has gotten Dodd into hot water.

Dodd is under fire over a loophole that ended up in legislation and allowed the roundly condemned bonuses to go forward. A clause in the $787 billion economic stimulus plan approved by Congress in February capped bonuses for executives at companies getting federal bailout aid.

But a one-paragraph provision tucked into the thick bill modified the cap to apply it only to future bonuses, not those that might have already been legally contracted.

"Treasury staff were working with Senator Dodd's staff throughout this process," Geithner said, noting that there had been concern at the Treasury whether provisions curbing pay might be subject to legal challenge.

Geithner indicated that a hotly awaited plan to remove troubled real-estate assets from banks' balance sheets -- which a senior Treasury official had indicated last weekend was expected within a week -- might be slipping.

"You'll see us move very quickly in the next few weeks to lay out a plan to help deal with these real estate-related assets that are at the core of the financial system," Geithner said.

He came under heavy criticism for outlining a framework for public-private partnerships last month to buy toxic assets without specifying details about how they will work. Financial markets still are looking for more certainty about the proposal.

Geithner dodged a direct response when asked when he expects the recession-struck U.S. economy to recover. He noted that "most economists" expect the economy to resume growing later this year.

(Reporting by Glenn Somerville; Editing by Dan Grebler)