As Outrage Grows, Congress Lashes AIG Chief Executive Over Bonus Debacle
BONUSES
Bangor Daily News
Drew FitzGerald
Boston University Washington News Service
March 18, 2009
WASHINGTON – Lawmakers expressed surprise and outrage Wednesday as they learned the details of $165 million in bonuses that troubled insurer American International Group paid some of its executives while accepting billions in government bailout money.
Recognizing surging public anger over the retention bonuses AIG paid its top employees – some of whom worked at the same troubled securities trading unit that drove the company to the brink of failure – House and Senate members offered strong rebukes and new legislation to help get back the taxpayer money used to pay the executives.
Sen. Olympia Snowe, R-Maine, said she will help resubmit a stronger version of legislation she and Sen. Ron Wyden, D-Ore., sponsored last month to retrieve large bonuses issued by companies receiving government assistance under the Troubled Asset Relief Program. The revived proposal would tax the companies and possibly the individuals who refuse to give back the money.
Congressional Democrats in conference committee removed her amendment to the stimulus bill, replacing it with weaker language, Snowe said.
“It’s virtually a toothless provision, and ours was practically ironclad,” Snowe said in a later telephone interview. The negotiations were “all behind closed doors,” she said, “so it was very difficult to ascertain what was happening.”
Sen. Susan Collins, R-Maine, said she voted against authorizing new bailout funds because of the lack of transparency in the first phase of funding.
“I am angry that the Treasury Department failed to exercise its authority to prohibit these bonuses in the first place,” Collins said in a statement. “As a condition of AIG receiving funds, the Treasury Department should have included a contractual requirement prohibiting the company from awarding these outrageous bonuses.”
AIG did not notify the Treasury Department about its latest retention bonuses until last week but did communicate the details to the Federal Reserve, according to testimony Edward Liddy, the CEO of AIG, offered Wednesday before the House Financial Services Committee.
Liddy apologized repeatedly for the payments, noting he joined AIG after the company signed off on the bonuses and could not rescind the compensation without breaking legal contracts. He did, however, surprise committee members by announcing that he had asked recipients to give back half of their bonuses, adding that some had voluntarily returned all their compensation.
But the CEO defended his decision to retain the employees who received the bonuses, saying their expertise was needed to manage the $1.6 trillion the company still owes.
“There’s still risk that that could blow up,” he said.
Committee Chairman Barney Frank, D-Mass., threatened to subpoena AIG for the names of the executives who received the bonuses and said the government, which by bailing out AIG took an 80 percent stake in the company, might have the authority to rescind the bonuses.
Snowe said the government can and should retrieve taxpayer money from the companies, but said the Senate proposal “may be a better way to go about it to address the concerns of constitutionality.”
Snowe nevertheless criticized the heads of corporations like AIG and Merrill Lynch for their “dismissive” and “arrogant” attitude toward public opinion and Congress. She said to her knowledge the heads of those corporations never notified the Finance Committee they were dispensing bonuses after receiving government bailout funds.
“It’s a mindset and a culture on Wall Street,” she said. “They don’t understand it’s a new day.”
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