AIG Restructures Bonuses to Extend Bailout
Embattled Insurer Says Bonuses Can't Be Cancelled Because of Contracts
By MATT JAFFE
WASHINGTON, March 14, 2009
Embattled insurance giant American International Group, the recipient of more than $180 billion in government aid, has agreed to restructure the terms of corporate bonuses after Treasury Secretary Tim Geithner demanded changes, an Obama administration official tells ABC News.
The government's bailout of AIG now tops $160 billion. That and other government bailout spending could result in higher taxes down the road, experts say.
The official said Geithner, in a phone call on Wednesday, told AIG CEO Edward Liddy that it was unacceptable for the company to give out tens of millions of dollars in bonuses for senior executives, as they are planning to do this week. Liddy wrote to Geithner telling him that the bonuses could not be cancelled altogether for breach-of-contract reasons, but AIG would change the terms of some of the payments.AIG has been the largest recipient of financial help as the government has spent trillions to address the current crisis.
In four tranches of funds, the most recent coming just weeks ago, the insurance giant has been bailed out by over $180 billion in federal aid, but this week's bonuses for senior executives were agreed upon before the government's rescue efforts began.
Geithner has been a vocal critic of the damage that some executives have done in doling out massive bonuses even as their companies were collapsing.
At a Senate Budget Committee hearing Thursday, Sen. Bernie Sanders, I-Vt., expressed his outrage about "greed on Wall Street."
"I completely share your sense of basic outrage and anger," Geithner replied. "I understand how powerful it is across the country. You're absolutely right that the judgments made by the leaders of our financial institutions have caused a catastrophic loss of basic confidence. It's making everything worse."
Earlier in the week, Geithner emphasized in an interview with PBS's Charlie Rose that some executives had "made some exceptionally bad judgments."
"As they got themselves in the position where they needed exceptional assistance from the government, many of those directors made things dramatically worse by continuing to pay out really unjustifiable bonuses to their senior executives and they were losing tens of billions of dollars," Geithner said.
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