Obama Fights AIG Bonus Pay
Obama Fights AIG Bonus Pay
Tuesday, March 17, 2009
By: Jim Puzzanghera and Tom Hamburger
WASHINGTON — Responding to growing public outrage, President BarackObama reversed course Monday and ordered his administration to "pursueevery legal avenue" to challenge $165 million in bonuses paid toemployees of insurance giant American International Group.
Obama Fights AIG Bonus Pay
Tuesday, March 17, 2009
By: Jim Puzzanghera and Tom Hamburger
WASHINGTON — Responding to growing public outrage, President BarackObama reversed course Monday and ordered his administration to "pursueevery legal avenue" to challenge $165 million in bonuses paid toemployees of insurance giant American International Group.Adding pressure, New York Attorney General Andrew Cuomo said he wouldsubpoena AIG for a list of employees who received the bonuses and foran accounting of whether they were involved in the derivatives activitythat brought the company to its knees last fall.
The cost ofAIG's rescue has risen to as much as $180 billion, with the governmenttaking an 80 percent stake in the insurer. Federal officials, stillworking on the final details of the last $30 billion of that total, areconsidering several options to attach conditions requiring the bonusesto be repaid.
"This is a corporation that finds itself infinancial distress due to recklessness and greed," Obama said. "Underthese circumstances, it's hard to understand how derivative traders atAIG warranted any bonuses, much less $165 million in extra pay. I mean,how do they justify this outrage to the taxpayers who are keeping thecompany afloat?"
It was questionable whether theadministration could force AIG to repay the money and what that wouldmean to a company 80 percent owned by taxpayers. But it would bedifficult, if not illegal, for the government to force the employees topay back bonus money the company was contractually obligated to pay,one employment law expert said.
Obama's sharp comments were areversal from this weekend when administration officials said they hadcarefully reviewed AIG's contracts and determined they could not blockthe bonuses. They had expected that the bonuses would be paid by Sundayto employees in the company's Financial Products division. Cuomo saidAIG officials told him the payments were made Friday.
News of the bonuses sparked anger from the public and from lawmakers.
"Businesses receiving government support should not be offering bonusesat the expense of the American taxpayer," said Rep. Diana DeGette,D-Colo. ". . . We cannot ensure market stability without strongoversight of these companies who seek government support, while at thesame time dole out huge financial bonuses from the pockets of theAmerican taxpayer."
AIG chief executive Edward M. Liddy wroteFriday in a letter to Treasury Secretary Timothy Geithner that thebonuses were required under contract to be paid.
Liddy, whowas brought in to run the company after the federal government took themajority stake in September, said he found paying the bonuses"distasteful and difficult." The bonus plan was adopted by AIG lastyear to retain 400 key employees of the Financial Products division ifthey worked through certain dates.
Last year, those paymentsranged from $1,000 to about $6.5 million, with seven employeesreceiving bonuses of more than $3 million, according to AIG. Liddy saidAIG was looking for ways to repay taxpayers for the bonuses.