Obama Orders Treasury Chief to Try to Block A.I.G. Bonuses

[ALien]

WASHINGTON — President Obama on Monday vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.

“In the last six months, A.I.G. 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.”

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.

“Treasury will be using this facility to address the excessive retention payments made to the A.I.G. Financial Products employees, which Treasury found to be completely unacceptable given that A.I.G. is already surviving on taxpayer funds,” said the official, who spoke on the condition of anonymity. “Treasury will be adding provisions to its new facility aimed at making taxpayers whole for the amounts of the offensive payments.”

Several repayment options were being considered, the official added.

In strongly worded remarks delivered in the White House East Room before small business owners, Mr. Obama called A.I.G. “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 A.I.G. 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?”

White House officials said that the administration is not looking to take A.I.G. to court to stop the company from paying out the bonuses. But they said the Treasury Department would be trying to figure out what it can do to block A.I.G. from making the payments within the legal confines of A.I.G.’s contractual obligations to the executives.

“All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses,” said Mr. Obama, who called the issue one of “fundamental values.”

“All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules,” he said, adding that the troubles with A.I.G. underscored the need for broad regulatory reform “so we don’t find ourselves in this position again.” His remarks were interrupted several times by applause from the audience of small-business owners.

The sharp presidential rebuke of A.I.G. is part of the White House effort to distance itself from abuses that could feed potentially disruptive public anger. Mr. Obama’s aides are worried that such anger could make it more difficult to win Congressional approval for the additional bailout packages that Mr. Obama has signaled may be necessary to stabilize the banking system. Already there have been moves in Congress to limit compensation for executives at banks and Wall Street firms that are receiving government help to survive.

Still, the president’s directive to his Treasury secretary to “pursue every legal avenue” against the payments seemed to conflict with statements over the weekend from the Treasury Department and from Lawrence H. Summers, Mr. Obama’s chief economic adviser in the White House, that the Treasury already had reviewed its legal options and concluded the administration had no power to stop the payments .

“We are a country of law,” Mr. Summers said on ABC-TV’s Sunday show. “This Week”:There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system,”

But increasing the pressure on A.I.G., New York State Attorney General Andrew M. Cuomo said on Monday that he would issue subpoenas to make the insurer release the names of the executives in its Financial Products subsidiary who received the bonuses, which were paid on Friday; their job descriptions, and details about their performance. In a letter to Edward M. Liddy, the company’s current chief executive, Mr. Cuomo said that if he did not receive the information by 4 p.m. he would issue subpoenas demanding compliance. After that deadline passed, Mr. Cuomo said that he had not received information he was seeking and would issue subpoenas for the data.

“I believe in transparency and disclosure,” Mr. Cuomo said on a conference call. “We believe taxpayers have a right to know.”

A.I.G. executives say that they are contractually obligated to pay the bonuses to their executives, including those who are part of the A.I.G. division where the company’s crisis originated.

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. On Sunday, the company disclosed the names of dozens of financial institutions that benefited from the bailout money injected into A.I.G. that the insurer then paid out to satisfy financial contracts.

READ MORE

[Mingus]

I can't believe AIG had the balls to use money like that again. The government ought to be able to force them out of the market, because they obviously are beholden to themselves and quit functioning as a business.

[Truthed]

Although I agree that AIG is a bunch of greedy assholes, this is just proof the government should have never got involved. I don't think its right for the government to tell them how to run their business, but then again, its ran by OUR money now, shouldn't we get to vote?

[kidflash2008]

We own 80% of AIG, and should have a say. The major problem was the Justice and other regulatory committees that allowed AIG and the others to get to big to fail. Unfortunately, those bonuses were in contracts made before the bailout and nothing can be done about them.

It is time for a Teddy Roosevelt to carry a big stick and bust up the monopolies and robber barons again.

[Mingus]

I believe that's called Obama and the Democratic Senate. Obama's bipartisanship should end on this issue, make it a rather unilateral decision in which the government will dictate to AIG what it can and cannot do. At least until the public ownership is turned over to private ownership again.

[Monkey]

Originally Posted by Mingus

I can't believe AIG had the balls to use money like that again. The government ought to be able to force them out of the market, because they obviously are beholden to themselves and quit functioning as a business.

This is like one mob family snuffin out another and the public cheers. All Business owners have one thing in mind, MONEY. Ruling a nation, its a business. They have their greed but noone else can. At least AIG can't send its employees to other countries to snuff out the competition.

[Mingus]

I'm operating under the impression that Obama wants a clean government. In this theoretical system, the government would not be a corporation and thus would be morally upright in forcing a corrupt and obviously defunct company out of business. It's more akin to what happened to Roy Bryant's store in Mississippi after the obviously rigged Emmett Till murder trial cleared him and his brother and then they turned around and admitted to the deed. The black community in Money, Mississippi stopped going to the store, forcing it out of business (the store was the segregation-era counterpart to the whites-only store; therefore, if the blacks stopped going to the store catering to them, it went out of business).

[kidflash2008]

The problem is, President Obama and Congress are legally bound to honor those bonuses. They were in place way before the problems, and when the TARP money was drawn up, the bonuses were kept in place.

They all can get angry and act indignant to put on a show for us public. However, it is just more hot wind from Washington DC.