AIG pays $450 million in bonuses after bailout
Ailing insurance giant AIG is planning to give out $450 million in bonuses this week to executives who led the firm to a $99.3 billion dollar loss in 2008.
Although AIG has agreed to cut back on multi-million-dollar bonuses for its highest ranking officers, the firm's lower-ranked employees are still set for a massive pay day. The bonuses are for staff at AIG's London subsidiary, AIG Financial Products, which helped trigger the collapse, the Wall Street Journal reports.
The payments have dismayed the US government, which has already given the American International Group $170 billion in federal bailout money and now holds an 80% ownership stake in the company.
According to the Washington Post, after Treasury Secretary Timothy Geithner phoned AIG Group CEO Edward Liddy to tell him that the payments were unacceptable, Liddy responded with a letter indicating that some restructuring was possible but that the bonuses could not be canceled due to a risk of lawsuits for breaching employment contracts.
Liddy also asserted that a refusal to pay bonuses could prompt an exodus of senior employees, writing, "We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses -- which are now being operated principally on behalf of the American taxpayers -- if employees believe that their compensation is subject to continued and arbitrary adjustment by the US treasury."
The Post states, however, that the current flap over bonus payments could have been avoided if the administration had been willing "to completely and explicitly nationalize the company" instead of merely taking an equity share.
As Talking Points Memo's Josh Marshall notes, "So on the business merits, they're bankrupt. But we decide it's in the national interest to prevent formal bankruptcy. And these sharks -- not everyone at AIG, but the execs that created this mess -- use that as a lever to get paid the money they never would have seen if we'd let (market) nature take its course."
(with wire services)
|Get Raw exclusives as they break -- Email & mobile