President Barack Obama is renewing pressure within his administration to find legal ways to block $165 million in bonus payments to American International Group employees after the government determined last week that the giant insurer was legally bound to give retention pay to workers.
Obama commented on AIG on Monday, saying the company finds itself in poor financial straits due to “recklessness and greed.” The firm has bailed out several times by the U.S. government, saying the company’s collapse would pose a systemic risk to the financial system.
The President’s comments came nearly a week after his administration held discussions with the company’s chief executive to block payments which were due to be paid this past Sunday to employees at AIG’s financial products division.
Last week, AIG chief executive Edward Liddy, who began to lead the company after it received its first bailout, was in talks with U.S. Treasury Secretary Timothy Geithner about the payments. Liddy told Geithner in a letter on Saturday that he found it “distasteful and difficult” to give out the bonuses, but said the company was legally required to do so. After a review of the matter, the Treasury also determined AIG had to pay Sunday’s amount.
However on Monday Obama kept pressure on the company, saying he has asked Treasury Secretary Timothy Geithner to pursue “every legal avenue” to block the bonuses.
This is a corporation that finds itself in financial distress due to recklessness and greed,” the President said ahead of an announcement for a plan to rescue small businesses with various lending plans. “Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?
AIG was obligated to pay $220 million in retention pay for 2008, with $55 million of that already paid in December, according Reuters, which said it had reviewed company documents on Saturday.
Retention payments for 2009 will total $230 million but may be reduced as some parts of the company are sold and employees are cut, Bloomberg noted. Liddy said the company hoped to reduce bonuses for 2009 by 30 percent.
Liddy, who was brought in by the U.S. government after bailing out the company, will testify in Congress about the company on Wednesday along with other witnesses.
In Liddy’s letter, he tells Geithner that the company “cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses - which are now being operated principally on behalf of American taxpayers - if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.”
The U.S. owns 80 percent of the company after its bailout. U.S. government officials saved the company after deciding that its failure would severely disrupt the financial system.