Critics blast AIG as flap escalates over bonuses
WASHINGTON -- President Obama latched on to the latest round of populist anger over corporate greed Monday, ordering his Treasury secretary to "pursue every legal avenue" to stop insurance giant AIG from giving $165 million in bonuses to some of the executives who drove the company into financial ruin before it was rescued by a government bailout.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama demanded of the company that last month posted the largest corporate quarterly loss in history, $61.7 billion.
Obama's scolding of American International Group came after his top economic advisers — Treasury Secretary Timothy Geithner, White House chief economist Christina Romer and Larry Summers, director of the National Economic Council — also blasted AIG over its doling out bonus checks ranging from $1,000 to $6.5 million to executives after accepting up to $180 billion in government bailout money.
The criticism reflected not just the rising anger over the bonuses, but also the question the flap poses for the president and Congress: how to continue with plans to rescue the economy — which could include billions more dollars in taxpayer money to shore up banks and other interests — in the face of growing public disgust with corporate America.
It will be difficult political terrain for a president already confronted with crippling job losses, a credit crunch, a home foreclosure crisis and a shaky stock market whose decline has been an assault on Americans' savings and investments.
On Monday, AIG was threatened with subpoena by New York Attorney General Andrew Cuomo. He demanded details about which executives would get the bonus money as part of an investigation by his office into whether the payments violated state law. Most of the money is going to executives in the unit that sold risky credit default swaps, the contracts that caused huge losses for the insurance company.
AIG CEO Edward Liddy, who had no comment Monday, will be in Washington on Wednesday to appear before a House subcommittee on capital markets in what is likely to be a contentious hearing. In an explanation of the bonus plan delivered to Geithner on Saturday, AIG said the bonus contracts were struck for 400 workers a year ago when the division they worked for was "expected to have a significant, ongoing role at AIG."
In a recent conversation, "I told him his actions were going to threaten the possibility that we could get additional money that is necessary to save the economy," said Rep. Paul Kanjorski, D-Pa., chairman of the subcommittee. "It's going to be very difficult. …The American people don't know what to believe about all of this, and neither do I."
