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AIG Bonuses - Another Outrage

American International Group, bailed out four times with up to $170 billion and now almost 80% government-owned, is under fire for paying executive bonuses last week to the very division responsible for the credit default swaps that nearly brought the company down.

AIG argues that the bonuses were promised before the taxpayer bailouts to the insurance giant, and that the bonuses are part of a legal, binding contract.

President Obama said on Monday, "This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it is hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?

"In the last six months, AIG has received substantial sums from the U.S. Treasury. I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole," Obama said.

The President said that Secretary Geithner has been working on the case with AIG CEO Edward Liddy. Obama also wanted taxpayers to understand that Liddy came on board after the bonuses were agreed to last year, and is not responsible for the bonus contracts.

Mr. Liddy sent a letter to Mr. Geithner, saying that while he finds the bonuses to be "distasteful", that at least some bonuses were in the best interest for the taxpayers and necessary to "attract and retain the best and brightest staff to lead AIG businesses."

New York Attorney General Andrew Cuomo subpoenaed AIG to find out exactly who received bonuses, how much the bonuses were, and what the bonuses were for. Cuomo reported today that 73 of AIG's top employees received bonuses of $1 million or more. And 11 of those employees aren't even working for AIG anymore, even after receiving the bonuses that were intended to retain them. The largest bonus paid was $6.4 million; seven other employees also received more than $4 million each.

Lawmakers and taxpayers are outraged at AIG's bonuses, but one senator's comment on Monday has received a lot of attention. "Obviously, maybe they ought to be removed," said Iowa Republican Charles Grassley in a radio interview on Monday. "But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide."

An AIG spokesman responded to Grassley's comments, saying, "The remark is very disappointing, but AIG's employees continue to work with poise and professionalism to take care of policyholders and repay taxpayers."

The media has appeared to take Senator Grassley's comment literally - it has made many headlines. Grassley made no apology for yesterday's comment and said that it was just rhetoric. He has made it clear that he doesn't really want death for these AIG executives, but rather a humble apology and a showing of remorse for boldly taking bonuses when they wouldn't have even had a job without a taxpayer bailout.

But while Grassley's comment can be dismissed as rhetoric, employees truly are fearing for their lives at AIG's Financial Products office in Wilton, Connecticut - the office responsible for the risky credit default swaps. The office has received angry phone calls and emails, and even death threats. It's so bad that some employees have resigned or simply stop coming to work.

Washington may not be able to prevent employees from taking bonuses. But if the recipients don't willingly return the money, those bonuses may still be returned to the taxpayer. Senate Majority Leader Harry Reid announced on Tuesday that "recipients of those bonuses will not be able to keep all their money - and that's an understatement."

Congress is currently is working on a bill - to negate those bonuses through emergency excise taxes - and expects a vote within days. Another possibility would be to take court action and sue bonus recipients to get the money back to the taxpayer.

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Monday, 13 July 2020

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