President Barack Obama’s top economics adviser, Lawrence Summers, said that insurance giant American International Group’s plan to award senior executives hundreds of millions of dollars in bonuses and retention pay is "outrageous."
"There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous," said Summers, chairman of the White House National Economic Council, during an appearance on "This Week" Sunday.
"What that company did, the way it was not regulated, the way no one was watching, what’s proved necessary, it is outrageous," Summers said.
In a phone call Wednesday to AIG CEO Edward Liddy, Treasury Secretary Timothy Geithner said it was unacceptable for the company to give out tens of millions of dollars in bonuses for senior executives after the government committed $170 billion to keep the struggling company afloat — far more government bailout money than has been awarded to any other firm.
In a letter to Geithner Saturday, AIG’s chairman and CEO agreed to restructure some of the payments. But Liddy wrote, "quite frankly, AIG’s hands are tied," arguing the firm would risk a lawsuit if it scrapped the bonuses.
Liddy also wrote the government’s demands could affect AIG’s ability to retain "the best and brightest talent to lead and staff the AIG businesses" if "employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
Summers argued today that the Obama administration has sought to limit the AIG bonuses.
"We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system," Summers said.
"What the Obama administration has done, based on the advice of attorneys, is done everything that it can to, within the law and within the tradition of upholding law that we have in this country, to limit these bonuses. And they have as a result of Secretary Geithner’s efforts been scaled back," he said.
UPDATE: When I asked Larry Summers today why taxpayers didn’t have a right to know which AIG "counterparties" were getting their bailout money, he pressed the companies to disclose. This afternoon, they did.