# Bailout King AIG to Pay Millions In Bonuses



## Bob Kellam (Apr 8, 2004)

*This will make you cranky*

*Bailout King AIG to Pay Millions In Bonuses*
Geithner Demands Firm Revise Awards

By David Cho and Brady Dennis
Washington Post Staff Writers
Sunday, March 15, 2009; A01

Insurance giant American International Group will award hundreds of millions of dollars in employee bonuses and retention pay despite a confrontation Wednesday between the firm's chief executive and Treasury Secretary Timothy F. Geithner.

But the company agreed to revise some executive payments after what chief executive Edward M. Liddy called a "difficult" conversation.

The bonuses and other payments have been exasperating government officials, who have committed $170 billion to keep the company afloat -- far more than has been offered to any other financial firm.

The issue came to a head when Geithner called Liddy and told him the payments were unacceptable and had to be renegotiated, an administration official said.

In a letter to Geithner yesterday, Liddy agreed to restructure some of the payments. But Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."

Lawyers at both the Treasury Department and AIG have concluded that the firm would risk a lawsuit if it scrapped the retention payments at the AIG Financial Products subsidiary, whose troublesome derivative trading nearly sank AIG. The company promised before the government started bailing out the firm in September that employees would be awarded more than $400 million in retention pay this year and next.

"I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote.

At the same time, the company said in documents provided to the Treasury, any steps that encourage specialists at AIG Financial Products to leave could open the U.S. government to further risk because of the hazards still posed by the $1.6 trillion portfolio of complex derivatives these employees are working to dispose.

AIG's top seven executives, including Liddy, already agreed in November to forgo their bonuses through this year. The next 43 highest ranking officers at the company are now to receive half of their bonuses, which total $9.6 million. Another quarter of that would be disbursed on July 15 and the rest on Sept. 15. But these last two payments would depend on whether the company makes progress in restructuring its business and paying back taxpayers.

Federal officials plan to recoup some of this bonus and retention pay in restructuring the company, an administration official said.

Officials at the Treasury Department and the Federal Reserve took over AIG in the fall, fearing one of the world's most successful conglomerates had grown so intertwined with the global economy that the firm's impending failure could have disastrous consequences.

In return for the bailout, the government took an 80 percent ownership stake in the company. Since then, the rescue package has ballooned. But both the Bush and Obama administrations have been reluctant to completely and explicitly nationalize the company, though this could have avoided the current flap over bonus payments, first reported by The Washington Post.

AIG officials said debate over the bonuses and retention pay has been simmering for months. During the past year, the company has repeatedly disclosed these payments in public financial filings. But as lawmakers increasingly clamored for details of their size, outrage grew in Congress and beyond.

Although the AIG Financial Products unit is proceeding with the payments, Liddy said the company would try to reduce future retention pay by at least 30 percent. In addition, the 25 highest-paid employees at Financial Products have agreed to reduce their salary to $1 for the remainder of 2009, Liddy wrote. Salaries for the rest of the firm's employees will be cut by 10 percent.

The Obama administration has been sensitive to how companies receiving government bailout money indulge their employees. Spending on jets, extravagant office furniture and bonus checks -- while not always a significant portion of corporate spending -- sours the public's view of the financial rescue effort at a time when the administration is considering asking Congress for billions of dollars more to help banks.

AIG officials say that some of upcoming bonuses are relatively modest once they are divided among employees. About 4,700 people in the company's global insurance units are receiving $600 million in retention pay. In addition, about $121 million in corporate bonuses will go to more than 6,400 people, for an average payout of about $19,000, according to AIG.

"These are not Wall Street bonuses," said one AIG executive, who was not authorized to speak on the record. "This is an insurance company." That executive also noted that the retention bonuses were put in place in early 2008 at a time when AIG Financial Products hadn't yet melted down. "They knew that the book was running into trouble," the executive said. "They thought they could weather the storm. But they thought they needed to keep people in their seats. They were worried."

Then, of course, everything changed. Financial Products kept posting bigger and bigger losses, burying AIG under a cash crunch from which it has not recovered.

Since that collapse, companies officials say, many Financial Products employees have lost nearly two-thirds of their compensation under the firm's deferred payment plan, in which bonuses are doled out over several years based on the firm's profitability.

The new cutbacks raise the risk that more employees will depart before the firm can be wound down and closed.

"These employees are highly specialized and/or are part of businesses that control billions of dollars of revenue and value that will be needed to repay the U.S. taxpayer," Liddy wrote in a letter last month. "Our competitors understand how valuable our top executives are, and we are acutely aware that they would like to siphon off our most talented leaders."

Over time, both the amount of retention pay and the number of recipients have grown.

Since taking over the rescue effort of AIG, the Obama administration has imposed stricter compensation rules, banning golden parachute payments for executives leaving firms and barring executive compensation above $500,000, except in the form of stock that cannot be cashed in until the government's loans are paid back.

But the government could not revoke bonuses promised before the government's rescue efforts began, officials said.

Sen. Christopher J. Dodd (D-Conn.), a leading critic of excessive executive compensation, backed a measure earlier this year to curb the practices but it included an exception for bonuses agreed to before Feb. 11, 2009.


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## ECassND (Dec 28, 2008)

> In a letter to Geithner yesterday, Liddy agreed to restructure some of the payments. But* Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff *"if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."


Maybe that WAS the problem already?

Ever notice that insurance companies and banks have the most extravagant buildings in town? Who's getting bailed out? Banks and insurance companies. uke:

Why are we rewarding failure?

The gov. should just stay out of it. Survuval of the fittest, I say.

This goes for both (D) and (R).


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## usmarine0352 (Nov 26, 2005)

.

*Is this really a big shocker?*

uke:

.


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## PSDC (Jul 17, 2003)

Here is another tidbit about AIG, are you aware that they have over
150,000 employees and over 2/3 our not citizens of the USA! That 
is correct since a vast majority of their business is done in overseas
operations. Why didn't those other countries assist with the bail out??


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## Bob Kellam (Apr 8, 2004)

*Obama: AIG Bonuses an 'Outrage' to Taxpayers*

By William Branigin
Washington Post Staff Writer
Monday, March 16, 2009; 1:29 PM

President Obama today blasted the plan of insurance giant AIG to pay millions of dollars in bonuses to traders who helped bring the company to the brink of ruin, calling the payments an "outrage" that violates "fundamental values" and underscores the need for financial regulatory reform.

In remarks following a meeting at the White House with small-business owners, Obama said AIG "is a corporation that finds itself in financial distress due to recklessness and greed." The company has received billions of dollars in federal bailout money.

"Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said. "How do they justify this outrage to the taxpayers who are keeping the company afloat?" He said he has asked Treasury Secretary Timothy F. Geithner to "pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

Obama added: "What this situation also underscores is the need for overall financial regulatory reform, so we don't find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions, so we've got greater authority to protect the American taxpayer and our financial system in cases such as this."

Speaking before Obama, Geithner admonished the nation's largest banks for withholding loans to many small businesses, telling the banks bluntly that they helped create the current mess and "bear a special responsibility for helping America get out of it" by increasing the flow of credit, especially since they have benefited from massive federal bailouts.

"We need you to put that assistance to work for the American economy," Geithner said. "Many banks in this country took too much risk, but the risk now to the economy is that you will take too little risk."

He said the administration will require the country's top 21 banks receiving federal assistance to include small-business loans in their monthly reports.

Geithner told the small-business owners and community bankers that the administration's new budget proposal includes provisions that nearly double -- to $250,000 -- the amount of new capital investment that can be written off on tax returns and that "reduce, and then altogether eliminate, capital gains taxes on the sale of stock in small businesses."

In addition, he said, drawing applause from the audience, the Internal Revenue Service today is announcing that small businesses will be able to carry back operating losses for five years instead of the usual two years "in order to increase your cash flow as we come out of this period and allow you to invest more in your operations."

Addressing the nation's banks, Geithner said they need to "go the extra mile in keeping credit lines in place on reasonable terms for viable businesses." He said that "by pulling back on credit, you push businesses to pull back, and this dynamic can feed on itself."

The remarks came after the administration outlined a series of measures to help the nation's small businesses weather the current economic crisis, offering reduced lending fees and up to $15 billion in extra funds to help unclog the secondary credit market.

Obama and Geithner met this morning with a group of small-business owners, community lenders and members of Congress at the White House to discuss the plight of small businesses, which account for the bulk of national job creation.

At the beginning of the meeting, Obama told reporters that the gathering is "a first step in what is going to be a continuing effort" to make sure credit flows to America's small businesses, which have been hit hard by conditions that were not of their own making.

"Even though they're maintaining profitable businesses, their credit lines are being pulled," Obama said of struggling small-business owners. "And that obviously has huge consequences for employment because small businesses are one of the biggest drivers of employment that we have. And so I've been on my team to figure out, even as we're working diligently to increase liquidity throughout the financial system, how can we do some stuff that specifically targets the small-business owner."

Under the package, the administration will take "immediate action to help ensure that credit gets flowing again to entrepreneurs and business owners," the White House said in a statement.

By the end of the month, the Treasury Department "will begin making direct purchases of securities backed by [Small Business Administration] loans to get the credit market moving again, and it will stand ready to purchase new securities to ensure that community banks and credit unions feel confident in extending new loans to local businesses," the White House said. "These purchases, combined with higher loan guarantees and reduced fees, will help provide lenders with the confidence that they need to extend credit, knowing they both have a backstop against their risk and a source of liquidity."

The White House said these measures would complement other efforts to help small businesses, including several tax cuts under a $787 billion economic stimulus package enacted last month. It said the package, officially called the American Recovery and Reinvestment Act, already provides for increased guarantees and reduced fees for certain Small Business Administration loans.

In a bid to jumpstart credit markets for small businesses, the Treasury Department will begin direct purchases of securities backed by a type of SBA loan, the White House said. The SBA normally guarantees $20 billion worth of loans a year, but new lending this year was forecast to fall below $10 billion.

Other measures, announced last month as part of a Treasury Department financial stability plan, include temporarily eliminating some processing charges and fees as high as 3.75 percent on certain SBA loans -- costs that lenders typically pass on to small-business borrowers. The plan also raises federal guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans.

Republicans have complained that small businesses are likely to be hurt by Obama's budget proposals, notably his plan to allow tax cuts to expire on schedule in 2011 for households earning more than $250,000 a year and to limit their itemized deductions.

Among those participating in today's meeting with Obama and Geithner were Sen. Mary Landrieu (D-La.), who chairs the Senate Small Business Committee; Sen. Olympia J. Snowe (Maine), the top Republican on the committee; Rep. Nydia Velazquez, chairman of the House Small Business Committee; and Rep. Sam Graves (R-Mo.), the senior GOP member of the committee. Other participants included local bankers, restaurant owners and other small-business leaders, as well as executives of community banking and business associations.

In a further effort to pull the nation out of the economic crisis, the White House announced today that it would hold a conference for local officials Wednesday on implementing provisions of the $787 billion stimulus plan.

"Like state governments, city and county governments will play a crucial role in partnering with the federal government to ensure that implementation of the Recovery Act is effective, transparent and efficient," the White House said in a statement. "Similar to last week's conference for states, this day-long conference will be a chance for local officials to bring forward ideas and share best practices, as well as hear presentations from a number of administration officials, including Earl Devaney, Chairman of the Recovery Act Transparency and Accountability Board."


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## barebackjack (Sep 5, 2006)

> In remarks following a meeting at the White House with small-business owners, Obama said AIG "is a corporation that finds itself in financial distress due to recklessness and greed." The company has received billions of dollars in federal bailout money.
> 
> Obama added: "What this situation also underscores is the need for overall financial regulatory reform, so we don't find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions, so we've got greater authority to protect the American taxpayer and our financial system in cases such as this."


How about this Mr. Obama? How bout you keep your damn govt nose out of it? Let em take their lumps. Oh no, just give them money, reward stupidity.

And, if you give them money, maybe you should do so WITH stipulations BEFORE you give them the money, instead of just handing it over and than *****ing about how their spending it. :eyeroll:

Stupidity knows no end.


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## Shu (Oct 21, 2003)

couldn't have said it better BBJ


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## TANATA (Oct 31, 2003)

The will lose all their top staff if they don't give out bonuses and that's why they want to. If you where some stud from Harvard with a Master's in Finance and could make 10 million a year somewhere, why would you stay at AIG and worry about the government constantly sticking their nose into the size of your paycheck.

Those could set AIG back years in recovery because everyone will simply go work for another firm where they don't have to worry about so much government interference.


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## barebackjack (Sep 5, 2006)

TANATA said:


> The will lose all their top staff if they don't give out bonuses and that's why they want to. If you where some stud from Harvard with a Master's in Finance and could make 10 million a year somewhere, why would you stay at AIG and worry about the government constantly sticking their nose into the size of your paycheck.


I would think some stud from Harvard with a Masters in Finance would be able to do his/her job within a company and actually make a profit instead of getting a bailout from the govt. But thats just me. If they didnt receive govt money, than they could tell the govt to "stick it" when they nose around. But they didnt, and now their paying for it.

They dicked up. Now their paying for it. They should have payed for it WITHOUT a govt bailout, but ole Pelobamareid wouldnt have that, part of their big government plan no doubt, get their dirty little noses in as much as they can.

Stupidity on both the sides of AIG and the GOVT. Stupidity begets stupidity I guess.


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## TANATA (Oct 31, 2003)

barebackjack said:


> TANATA said:
> 
> 
> > The will lose all their top staff if they don't give out bonuses and that's why they want to. If you where some stud from Harvard with a Master's in Finance and could make 10 million a year somewhere, why would you stay at AIG and worry about the government constantly sticking their nose into the size of your paycheck.
> ...


The problem is you can't really point fingers and say you didn't do your job and got yourself into this situation, when almost everyone in the financial world was doing it and/or in the process of getting into it when the bubble burst. If everyone gets fooled and fails to recognize a problem, you can't really blame a few.


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## PSDC (Jul 17, 2003)

Unfortunately Tanata you are wrong. These companies played games
with every risky investment out there and got burned. May I also add
that ALL these companies are publicly traded. The mutual insurance companies did not have these financial melt downs only the stock
companies.


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## barebackjack (Sep 5, 2006)

PSDC said:


> Unfortunately Tanata you are wrong. These companies played games
> with every risky investment out there and got burned. May I also add
> that ALL these companies are publicly traded. The mutual insurance companies did not have these financial melt downs only the stock
> companies.


Thats exactly right. They gambled and lost. They got greedy, and got burned. And now, Pelobamareid see an "in" to further big govt and get their grubby little paws in on "the business".


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## TANATA (Oct 31, 2003)

No need to try and explain because people that do not what to learn can not be taught. Read some of the other threads on the stock market, I do know what I'm talking and do my research. A lot of investments people got burned on had A or higher safety ratings, but the people still got burned.

Does this mean they where stupid? Or more of the fact that the market as a whole was ill-informed on a new form of investment. This was a market wide mistake in many cases and is a lot bigger then a few guys at AIG making a bad decision.


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## R y a n (Apr 4, 2005)

TANATA said:


> No need to try and explain because people that do not what to learn can not be taught. Read some of the other threads on the stock market, I do know what I'm talking and do my research. A lot of investments people got burned on had A or higher safety ratings, but the people still got burned.
> 
> Does this mean they where stupid? Or more of the fact that the market as a whole was ill-informed on a new form of investment. This was a market wide mistake in many cases and is a lot bigger then a few guys at AIG making a bad decision.


You posts have been spot on accurate Tanata.

Don't let the misinformed or less informed sway your conviction.

:thumb:


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## TANATA (Oct 31, 2003)

Thank you. I probably talk out of my butt on a lot of subjects between trucks to shooting deer, but pay a lot of attention to my future job field.


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## jgat (Oct 27, 2006)

I heard today that the 165 million in bonuses equates to about 1/1000 of 1% of the total money that the gvt has given to them. Even though it about makes you want to puke, if this was in the contracts of these individuals, what can you do? The government sure can't tell them to break their contracts.


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## TANATA (Oct 31, 2003)

jgat said:


> I heard today that the 165 million in bonuses equates to about 1/1000 of 1% of the total money that the gvt has given to them. Even though it about makes you want to puke, if this was in the contracts of these individuals, what can you do? The government sure can't tell them to break their contracts.


Not only the fact that contracts would be broken, but what do you think that does to image of a company. I'm not going to keep working at a company that breaks my salary contract. Then AIG is left in a bad position from there original problem, and now has no staff left. Not a good position for a company the government owns an 80% stake in. The government would be shooting themselves in the foot in the long run if they push for this, but I think they are desperately trying to set an example to shut up the general public.

I feel way too much policy is being enacted to settle down the public, which is so uninformed when it comes to how wall street works now days it isn't funny. There is a lot of stuff going on that even financial investors can't begin to explain, but the public has a feeling of resentment towards wall street and capital hill, and seem to think they're informed on the same subjects because they watched 60 minutes last night. Public outcry could end up hurting us even worse as issues like CEO pay and company trips comes under such scrutiny from people that don't know half of what they're talking about.


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## marshman (Jul 8, 2005)

Contracts don't mean [email protected]#$ nowadays! I work for GM and our contract is being run through the dirt right now, but you don't see me getting a bonus. Does this mean I get to sue GM for breach of contract, hell no! I say boycott AIG and put the money into a different company - one that doesn't wipe their a$$ with the tax payers dollars!


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## TANATA (Oct 31, 2003)

marshman said:


> Contracts don't mean [email protected]#$ nowadays! I work for GM and our contract is being run through the dirt right now, but you don't see me getting a bonus. Does this mean I get to sue GM for breach of contract, hell no! I say boycott AIG and put the money into a different company - one that doesn't wipe their a$$ with the tax payers dollars!


There is difference between UAW and GM agreements and personal salary agreements. They had set bonuses to pay if so and so was accomplished. Chances are you've already been paid for last month's work, this is them fighting over work they did the over the last year and are trying to get paid for it. Totally different area of salary contract agreements.

AIG is a huge financial firm that is literally intertwined with the world. If you want to put it under and lose all the money invested, go for it but it will only hurt you. AIG going out of business would personally affect YOU.

I don't think their management team is any different than every other major institution. They are trying to pull out of this mess and make the best out of the situation so they can return to making profit. Do you think they are giving away bonuses because they don't care about money? Investment guy care more about money then anyone in the world, if they are spending it, it's because they feel it will better their position, whether its 6 months down the road or 60 years.


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## Bob Kellam (Apr 8, 2004)

MARCH 17, 2009, 1:33 P.M. ET Cuomo Cites 73 AIG Bonuses for $1 Million or More 
Senate Democrats Prepare Excise Tax

more in Politics »By MARTIN VAUGHAN and COREY BOLES
New York Attorney General Andrew Cuomo said troubled insurance giant American International Group Inc. paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company.

Mr. Cuomo subpoenaed information from AIG on Monday to determine whether the payments constitute fraud under state law. He says contracts written in March 2008 guaranteed employees 100% of their 2007 pay for 2008, regardless of their performance.

AIG Bonuses
New York Attorney General Cuomo provided details of bonuses awarded at AIG. Here are the details he provided. See the letter.The top recipient received more than $6.4 million;22 individuals received bonuses of $2 million or more, and combined they received more than $72 million;73 individuals received bonuses of $1 million or more; andEleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 millionPresident Barack Obama and Washington lawmakers have blasted AIG for paying $160 million in bonuses to employees of its Financial Products division, the unit primarily responsible for the company's meltdown.

Meanwhile, Senate Democrats were preparing legislation Tuesday that would levy up to a 91% excise tax on the bonuses paid to AIG executives.

In a letter sent to Edward Liddy, AIG's chairman and chief executive, 10 Democratic senators urged him to renegotiate the $165million paid out in bonuses to executives at the company's troubled financial products division.

If not, the letter said, lawmakers wouldn't hesitate to recoup the bonuses through legislation.

"We stand ready to take the difficult, but necessary step of working to enact legislation that would allow the government to recoup these bonus payments, perhaps by imposing a steep tax -- as high as 91% -- that will have the effect of recovering nearly all of the bonuses that have been paid out since AIG turned to taxpayers for help," the letter said.

Mr. Liddy was installed as head of AIG after the federal government stepped in last year to rescue the ailing insurer.

Senate Finance Committee Chairman Max Baucus (D., Mont.) said Tuesday that lawmakers of both parties were working on legislation that would be introduced soon.

Since last fall, taxpayers have pumped more than $170 billion into AIG to keep the beleaguered company afloat. This past weekend, the company disclosed that around $90 billion of that money had been paid out to third parties it had outstanding contracts with, including large U.S. and international banks.

Mr. Shulman declined to give a specific answer, saying he couldn't go beyond Mr. Obama's statement on Monday, in which he expressed "outrage" over the bonuses.

But Mr. Shulman said he recognized the finance committee wants to address the issue of the AIG bonuses, and "we stand ready for IRS to do what it can."

Sen. Bill Nelson (D., Fla.) said it may be possible to impose excise taxes as high as 90% on the bonuses.

At issue are $165 million in bonuses paid to employees of AIG's financial-products division, after the U.S. government has poured billions of dollars into AIG to shore up the foundering insurance giant.

House Majority Leader Steny Hoyer (D., Md.) said he was unsure whether it would be possible for Congress to draft a law specifically targeted at the AIG executives. He suggested one possibility might be to pass a measure taxing all executives who received taxpayer funds through the Treasury's financial rescue plan.

But, Sen. Hoyer said, there was no question in his mind the AIG executives should give the money back, saying if "they had any common sense at all," they would. "If they were at all sensitive to what the American people had done to keep their company afloat &#8230; they would simply give this money back."

Senate Banking Committee Chairman Christopher Dodd (D., Conn.) said he would support the idea of taxing bonus pay. But taxing AIG would be akin to "taxing ourselves," because more than $173 billion in taxpayer funds have been pumped into the company, giving the U.S. government an 80% stake.

Sen. Hoyer said all options were on the table, and lawmakers were looking at what actions could be taken, and were in discussions with Obama administration officials over how to proceed to recoup some of the money paid out to the executives.

House Minority Leader John Boehner (R., Ohio) reserved his anger for the Obama administration's handling of the AIG situation.

At a press conference Tuesday morning, he questioned why officials agreed to give the beleaguered company a further $30 billion only weeks ago, without ensuring there were sufficient controls in place to limit how the firm used the money.

"I think this is outrageous, and I think the American people are rightly outraged that their tax money is going to pay bonuses to the very people that got this company in trouble," Rep. Boehner said.

-Jessica Holzer contributed to this article.
Write to Martin Vaughan at [email protected] and Corey Boles at [email protected]


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## TANATA (Oct 31, 2003)

So since everyone is so upset about them spending 160 million, lets make them pay another 100+ million in excise taxes?! Sounds like a great plan... :eyeroll:


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## PSDC (Jul 17, 2003)

What this really shows is how stupid our govt. is with regards to big 
business. They should have placed a limit on any bonuses to executives before they handed out any of the TARP funds.


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## MSG Rude (Oct 6, 2003)

There are no winners in this deal....except for the failures that get the bonus's. Wait, are they still failures then?


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## TANATA (Oct 31, 2003)

They actually did a rather good job. They got it previously guaranteed that they would be paid ATLEAST 100% of their 07 salary for the 2008 period.

AIG made a bad deal before they saw the market crash coming and all the execs should get that pay. BUT, the execs might have coluded and since they are in charge of the entire corporation, paid themselves with stockholders' money when they knew the company was about to fail.


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## Bob Kellam (Apr 8, 2004)

*The Real AIG Outrage *

President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout.

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG "rescue." This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

* * *
Given that the government has never defined "systemic risk," we're also starting to wonder exactly which system American taxpayers are paying to protect. It's not capitalism, in which risk-takers suffer the consequences of bad decisions. And in some cases it's not even American. The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company.

The politicians also prefer to talk about AIG's latest bonus payments because they deflect attention from Washington's failure to supervise AIG. The Beltway crowd has been selling the story that AIG failed because it operated in a shadowy unregulated world and cleverly exploited gaps among Washington overseers. Said President Obama yesterday, "This is a corporation that finds itself in financial distress due to recklessness and greed." That's true, but Washington doesn't want you to know that various arms of government approved, enabled and encouraged AIG's disastrous bet on the U.S. housing market.

Scott Polakoff, acting director of the Office of Thrift Supervision, told the Senate Banking Committee this month that, contrary to media myth, AIG's infamous Financial Products unit did not slip through the regulatory cracks. Mr. Polakoff said that the whole of AIG, including this unit, was regulated by his agency and by a "college" of global bureaucrats.

But what about that supposedly rogue AIG operation in London? Wasn't that outside the reach of federal regulators? Mr. Polakoff called it "a false statement" to say that his agency couldn't regulate the London office.

And his agency wasn't the only federal regulator. AIG's Financial Products unit has been overseen for years by an SEC-approved monitor. And AIG didn't just make disastrous bets on housing using those infamous credit default swaps. AIG made the same stupid bets on housing using money in its securities lending program, which was heavily regulated at the state level. State, foreign and various U.S. federal regulators were all looking over AIG's shoulder and approving the bad housing bets. Americans always pay their mortgages, right? Mr. Polakoff said his agency "should have taken an entirely different approach" in regulating the contracts written by AIG's Financial Products unit.

That's for sure, especially after March of 2005. The housing trouble began -- as most of AIG's troubles did -- when the company's board buckled under pressure from then New York Attorney General Eliot Spitzer when it fired longtime CEO Hank Greenberg. Almost immediately, Fitch took away the company's triple-A credit rating, which allowed it to borrow at cheaper rates. AIG subsequently announced an earnings restatement. The restatement addressed alleged accounting sins that Mr. Spitzer trumpeted initially but later dropped from his civil complaint.

Other elements of the restatement were later reversed by AIG itself. But the damage had been done. The restatement triggered more credit ratings downgrades. Mr. Greenberg's successors seemed to understand that the game had changed, warning in a 2005 SEC filing that a lower credit rating meant the firm would likely have to post more collateral to trading counterparties. But rather than managing risks even more carefully, they went in the opposite direction. Tragically, they did what Mr. Greenberg's AIG never did -- bet big on housing.

Current AIG CEO Ed Liddy was picked by the government in 2008 and didn't create the mess, and he shouldn't be blamed for honoring the firm's lawful bonus contracts. However, it is on Mr. Liddy's watch that AIG has lately been conducting a campaign to stoke fears of "systemic risk." To mute Congressional objections to taxpayer cash infusions, AIG's lobbying materials suggest that taxpayers need to continue subsidizing the insurance giant to avoid economic ruin.

Among the more dubious claims is that AIG policyholders won't be able to purchase the coverage they need. The sweeteners AIG has been offering to retain customers tell a different story. Moreover, getting back to those infamous bonuses, AIG can argue that it needs to pay top dollar to survive in an ultra-competitive business, or it can argue that it offers services not otherwise available in the market, but not both.

* * *
The Washington crowd wants to focus on bonuses because it aims public anger on private actors, not the political class. But our politicians and regulators should direct some of their anger back on themselves -- for kicking off AIG's demise by ousting Mr. Greenberg, for failing to supervise its bets, and then for blowing a mountain of taxpayer cash on their AIG nationalization.

Whether or not these funds ever come back to the Treasury, regulators should now focus on getting AIG back into private hands as soon as possible. And if Treasury and the Fed want to continue bailing out foreign banks, let them make that case, honestly and directly, to American taxpayers.


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## R y a n (Apr 4, 2005)

AIG CEO Liddy is testifying right now.

Some talking points I've gathered watching thus far:

It is truly fascinating watching this. I will say that Liddy is handling this scrutiny honorably and articulately. He is not responsible for this mess, having inherited the contract situation along with the rest of AIG's responsibilities. He came out of retirement 6 months ago at the request of the government and now look what he has to deal with.

Like was said in the hearings, this isn't about Liddy in the sense of him creating or entering in to the contracts that paid out these retention bonuses. He may have some disagreement with Congressional leaders on how he has handled the bonus payment situation in the interim, but he shouldn't be vilified for trying to do the right thing given the information he had.

You can just see the entire committee waiting to pounce on him wanting to ask the hard questions on behalf of their constituents.

The committee chairman jumped on a bunch of folks in pink holding up signs in the back. He warned them at the beginning of the meeting, and later finally had enough and had the signs removed.


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## KRAKMT (Oct 24, 2005)

PSDC said:


> What this really shows is how stupid our govt. is with regards to big
> business. They should have placed a limit on any bonuses to executives before they handed out any of the TARP funds.


Exactly, the government is playing school marm over a bunch of crooks that have now changed who the mark is.

If you run the company into the ground to the point of a bailout- let them try to sue for their bonus-

And don't believe for a minute that they were innocent victims themselves, pure bunk.

My mother had a saying- beggers can't be choosers. They come a begging then they face the new rules.


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## jgat (Oct 27, 2006)

Pretty riveting stuff. The fact that the stimulus bill was originally set up to prevent the bonuses from being paid, and Dodd specifically put an amendment in there to keep them just reeks of dirty politics to me. AIG contributed a lot of money to Dodd. It is really starting to come together to make perfect sense. Bend over America! I don't really understand why those who voted for the stimulus bill are so outraged. They put these bonuses on a silver platter for the AIG execs, yet they stand up there and act like they are so righteous and Liddy is the devil. What a bunch of arrogant useless pricks.


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## jgat (Oct 27, 2006)

http://www.cnn.com/2009/POLITICS/03/18/ ... index.html

Dodd acknowledged his role in the change after a Treasury Department official told CNN the administration pushed for the language.

Both Dodd and the official, who asked not to be named, said it was because administration officials were afraid the government would face numerous lawsuits without the new language.

Dodd, a Democrat, told CNN's Dana Bash and Wolf Blitzer that Obama administration officials pushed for the language to an amendment designed to limit bonuses and "golden parachutes" at those companies.

"The administration had expressed reservations," Dodd said. "They asked for modifications. The alternative was losing the amendment entirely."


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## TANATA (Oct 31, 2003)

With today's politics in our country, the general population will never know more than 50% of the true story........


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## Bob Kellam (Apr 8, 2004)

> With today's politics in our country, the general population will never know more than 50% of the true story........


Enlighten us........ Please.........


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## swift (Jun 4, 2004)

I watched the testimony and saw first hand what I suspected for quite some time. Many congressmen are idiots people that do not stand by their word.

Let me explain, Mr Liddy was blasted by an idiot congressman from NY because he (Liddy) had a legal opinion of the contracts done and followed that opinion. He said over and over just renig on th e dontracts and tell them sue me. Well this type of thinking is is absurd. He (the congressman) claimed to be a contract lawyer and with advice like that it's no wonder he had to find a new line of work.

It came out that the FED sits in on board meetings on behalf of the govt. But nobody wanted to go down that road.

The whole dog and pony show yesterday showed the country needs to clean house on congressmen and elect a new body.


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## TANATA (Oct 31, 2003)

Bob Kellam said:


> > With today's politics in our country, the general population will never know more than 50% of the true story........
> 
> 
> Enlighten us........ Please.........


I have no idea. I think only AIG and Washington will know most of what's going on. Seems to have been a lot of cover up already.


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## KRAKMT (Oct 24, 2005)

swift said:


> Well this type of thinking is is absurd.


Why?


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## barebackjack (Sep 5, 2006)

swift said:


> The whole dog and pony show yesterday showed the country needs to clean house on congressmen and elect a new body.


Worst congress our countries EVER had!

I dont even think their corrupt anymore, I think their just plain a$$ idiots.


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## takethekids (Oct 13, 2008)

There are plenty of food manufacturing companies that have fallen through (or are coming close) recently. Those companies pay their people more and have make poor choices about their debt to company worth ratio and they're paying for it. The corporation I work for is doing quite well. I work for a modest company that maintains less than 20% of debt in relation to their worth. We don't get huge bonuses like some of the other companies that are out there, but we have job security. Survival of the fittest indeed......Time to trim the fat (so to speak) in our society and take our lumps as some of these giants go down. They wouldn't be in this situation if they'd made better decisions with their money. Now they're able to make poor decisions with our money :******: Let em' fall if they were too top-heavy to support themselves. I vote NO to corporate welfare programs! :eyeroll:

I'm not an economist, but I'm not stupid either. I have a very hard time believing that is in our best interest to keep supporting those who can't support themselves.


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## USAlx50 (Nov 30, 2004)

I'm not sure why you guys are ****** off at the people who got bonuses. It was already in their contract before the bailout, did they expect that contract to automatically change because they gave them a bailout?

BBJ nailed it with this.


> How about this Mr. Obama? How bout you keep your damn govt nose out of it? Let em take their lumps. Oh no, just give them money, reward stupidity.
> 
> And, if you give them money, maybe you should do so WITH stipulations BEFORE you give them the money, instead of just handing it over and than b*tching about how their spending it.
> 
> Stupidity knows no end.


If you dont think it is OUTRAGEOUS that our government can just decide to take money from people whenever they want you are nuts.


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## HUNTNFISHND (Mar 16, 2004)

USAlx50 said:


> I'm not sure why you guys are ticked off at the people who got bonuses. It was already in their contract before the bailout, did they expect that contract to automatically change because they gave them a bailout?


I agree. They should have been fired instead. Who the hell gives a bonus to employees who allow the business to fail to the point of a government bailout? All of these companies should have been allowed to go under and let the CEO's and execs stand in the soup line with everyone else! :******:

Someone smarter would have been there to pick up the peices and have a stronger company in the long run. But no, our legislatures rewarded bad behavior, what the hell did they expect from that. uke:


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## avrilmat (Nov 9, 2013)

AIG bailout brought the US $17.7 billion in profits. It was reported recently that after all was said and done, the bailouts completed by the government were likely to turn a profit. That has just been confirmed, as part of the last of the government's stake in AIG was recently sold and made for almost $18 billion in profit from the AIG bailout.


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