US Congress wants AIG bonuses back

March 19th, 2009 - 1:50 am ICT by IANS  

Barack Obama Washington, March 19 (DPA) The US Congress Wednesday tapped into growing public ire over bailed-out insurance giant AIG’s payment of bonuses as legislators explored ways to reclaim $165 million from the company and its employees.
“There’s a tidal wave of rage … across America,” said Representative Gary Ackerman at a hearing of the House Financial Services subcommittee.

US President Barack Obama, who on Monday expressed anger and outrage over the situation, has ordered Treasury Secretary Timothy Geithner to figure out how to block future bonus payments and recover those that were paid last Friday.

American International Group (AIG) head Edward Liddy was to face the music later in the day before legislators who have been inundated with angry messages from constituents over his company’s payment of bonuses to the traders who sold financial instruments that helped trigger the global credit crisis.

AIG is being kept afloat by an estimated $200 billion of government money intended to help unblock the freeze in credit markets.

Liddy admitted in prepared testimony that “the patience of America’s taxpayers is wearing thin.” But he also complained in a separate document about the wave of criticism that included a suggestion by one lawmaker that AIG executives take their own lives.

A statement by a US senator that AIG employees should consider suicide is unfathomable, especially for one of our nations leaders,” Liddy said in a letter to employees, Bloomberg financial news service reported.

He was referring to a remark by Republican Senator Charles Grassley to an Iowa radio station that AIG executives should adopt the Japanese method of apology 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”.

Grassley has since backed off, saying he was only demanding “contrition”.

The exchange indicated the extent of anger that more than $165 million in bonuses were paid to 418 people at AIG, which is at the core of the global financial meltdown as the firm which insured many of the questionable financial instruments developed by the financial industry over the past decade.

The bonuses included payments of $4 million each to 10 top recipients and $1 million each to 73 other employees.

Pressure grew Wednesday for AIG to divulge the names of bonus recipients. US Representative Barney Frank, a Democrat and chair of the House Financial Services Committee, said if Liddy did not voluntarily turn over the names, he would form a special panel to subpoena the information.

He suggested that the US government also assert its 80-percent ownership role of AIG and bring lawsuits against the bonuses.

“We should be exercising our rights as owners to say these people performed so poorly … we are justified in rescinding the bonuses.”

New York State Attorney General Andrew Cuomo is also pressing an investigation of the bonuses.

AIG claims it is legally obligated to pay the bonuses, which it says are needed to retain top talent and were included in contracts before the bailout. Frank has charged that the bonuses were “rewarding incompetence”.

Meanwhile, President Barack Obama, under fire over the payment of huge bonuses to traders Wednesday vowed to end the culture of corporate greed in America. He made his remarks on the White House lawn as he headed to California for two days away from the capital, where the crescendo of public ire over the payments is rising.

Obama insisted he and his administration were not responsible for creating the “mess” at American International Group (AIG), whose insurance of questionable financial instruments has contributed to the global meltdown.

But he added: “Ultimately, I’m responsible. The buck stops with me. And my goal is to make sure that we never put ourselves in this kind of position again.”

He said that the “culture” of “excess greed, excess compensation, excess risk” has to change and pledged regulatory reform to put more controls on the finance industry.

He said the government was working to set up a “resolution authority” similar to the Federal Deposit Insurance Corporation, which regulates banks and insures bank deposits.

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