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Obama Spanks AIG: Will he get the money back?

abstract:American International Group (AIG), the faltering insurance giant, paid out $165 million in bonuses from their government bail-out check. Obama was quick to respond. (Watch the video) and the attorney general Andrew M. Cuomo of New York says that because AIG has received federal bailout money, it has to consider what is best for taxpayers. He will subpeona evidence and use every measure within his power to stop the payments. AIG says its hands are tied. They say that they are contractually obligated to pay the bonuses to their executives, including those who are part of the AIG division where the company’s crisis originated.


March 16, 2009

Hubris in the Face of Bailouts

“In the last six months, AIG has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole,” The New York Times’s Helene Cooper reports from Washington.

In strongly worded remarks delivered in the White House East Room before small-business owners, Mr. Obama called AIG. “a corporation that finds itself in financial distress due to recklessness and greed.”

“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses at all, much less $165 million in extra pay,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”

Later in the day, a White House official disclosed that the administration would use a pending $30 billion installment for A.I.G. to recoup the $165 million in retention payments to A.I.G. employees in the business unit that brought the company to the brink of collapse last year.

The government’s rescue of the insurer began last fall with the Federal Reserve’s $85 billion emergency loan. The taxpayer assistance has now grown to $170 billion, and the government owns nearly 80 percent of the company.

Story Updates

Bonuses ranging from $1,000 to more than $6m were paid to some 400 staff in the division handling the mortgage-backed assets at the heart of the financial crisis. Seven senior employees were paid more than $3 million, while 73 members of staff received bonuses of more than $1m. As at Mar 24th, 2009 nine of the ten top executives agreed to return their bonuses.

The bonus debacle had prompted the approval of a bill by the US House of Representatives to impose a 90% tax on bonuses awarded by companies bailed out by the US government. But President Barack Obama said such a measure would be unconstitutional.

The announcement that much of that money is now being returned seems likely to ensure that the bill never reaches his desk



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