The LuLac Edition #758, Mar. 17th, 2009
PHOTO INDEX: AIG LOGO.
Moves are underway to stop the contracted bonuses to AIG employees. President Barack Obama declared that insurance giant American International Group is in financial straits because of "recklessness and greed" and said he intends to stop it from paying out millions in executive bonuses. "It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said at the outset of an appearance to announce help for small businesses hurt by the deep recession. "How do they justify this outrage to the taxpayers who are keeping the company afloat," the president said.
Obama spoke out in the wake of reports that surfaced over the weekend saying that financially strapped American International Group Inc. was paying substantial bonuses to executives. Noting that AIG has "received substantial sums" of federal aid from the federal government, Obama said he has asked Treasury Secretary Timothy Geithner "to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole."
Meanwhile, in New York State Attorney General Andrew Cuomo said Monday he has issued subpoenas for the names of American International Group employees given millions of dollars in bonuses despite their possible roles in the insurance giant's near-collapse.
Cuomo said his office will investigate whether the $165 million in payments are fraudulent under state law because they were promised when the company knew it wouldn't have the money to cover them. AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history, and it has benefited from more than $170 billion in a federal rescue.
"When a company pays funds that the company effectively doesn't have, it's akin to a looting of a company," Cuomo said. "You could argue if the taxpayers didn't bail out AIG, those contracts wouldn't be worth the paper it's printed on." Cuomo made good on a threat he made Monday in a letter to AIG's government-appointed chief executive, Edward Liddy, in which he said he would issue administrative subpoenas after 4 p.m. if he didn't get the employees' names, information about their work at AIG's Financial Products subsidiary and the contracts the company said required paying the bonuses. The Financial Products unit sold credit default swaps, the risky contracts that caused massive losses for the insurer.
Close to home, Congressman Kanjorski is said to be expressed outrage and disappointment about recent reports that American International Group (AIG) will pay $165 million in retention bonuses for 2008 to executives and workers at the very business unit that underwrote the credit default swaps that caused the company to lose tens of billions of dollars and seek a federal bailout. “I appreciate the many concessions and changes that Edward Liddy has made since joining AIG as CEO, including accepting a dollar-a-year salary and cutting back bonuses and salaries for AIG’s other top executives,” said Chairman Kanjorski. “Because the federal government now has an 80 percent stake in the company, AIG has a duty to spend the taxpayers’ money responsibly. I am therefore extremely disappointed that AIG will move forward with its plans to pay out 2008 bonuses totaling $165 million, on top of the $55 million paid out late last year, for employees at the very business that caused the company to collapse.” Chairman Kanjorski added, “While these bonuses were agreed to in early 2008 before AIG received any taxpayer money, considering the sweeping changes that have occurred since then, further concessions in AIG’s contracts must be seriously considered, especially at the Financial Products unit. Although we must effectively and expeditiously wind down the systemic risks caused by AIG Financial Products, we cannot allow individuals who acted irresponsibly to reap undue benefits.”
“My Subcommittee will hold a hearing on Wednesday to examine AIG’s operations and the taxpayer assistance it has received. Among those testifying will be Mr. Liddy. These sizable payouts at AIG’s Financial Products unit will certainly be an important topic that my colleagues and I intend to investigate further at the hearing,” concluded Chairman Kanjorski. When media reports of AIG’s retention bonus plans for Financial Products first surfaced in January, Chairman Kanjorski personally called Mr. Liddy to express his concerns and outrage. Additionally, Chairman Kanjorski and Congressman Joseph Crowley (D-NY) joined together to write to the Federal Reserve and the Treasury Department urging them to closely scrutinize the unit’s bonus plans and to take steps to protect taxpayers by paring back these excessive rewards. Previously, Chairman Kanjorski and Congressman Crowley had worked to convince AIG to stop $93.3 million in deferred compensation payouts to several thousand AIG employees and agents.
In an appearance on WYOU TV I defended the AIG bailout because the company had many tenacles in the business and insurance world. But this is a slap in the face to the taxpayers who own 80% of the company. And as far as the logic goes that AIG has to provide these bonuses because these employees are so valuable, let me say this is the same division that ran the company into the ground. And besides in this economy where are they going to go? My solutio: pick a few King's and Wilkes Business Majors, give them a decent New York wage (without a bonus) and they'll do way better than these financial prima donnas on Wall Street.