Former CEO Hank Greenberg Piles on AIG for Bonuses
Fmr AIG chief Hank Greenberg joins Obama in pillorying payout for AIG traders.
March 16, 2009— -- Add former AIG chief executive Hank Greenberg to the growing list of public figures fuming about the $165 million in retention bonuses awarded to executives at the bailed-out insurance giant.
Greenberg, who stepped down as CEO in 2005, told ABCNews.com that it was "mind-boggling" that AIG executives were promised retention pay in the first place.
Given how much the company has lost, "why would you make it up in bonuses? It's hard to understand," he said.
"I think many of the people who received bonuses did not deserve them."
Greenberg has been criticized for supposedly helping to create the financial problems plaguing AIG today. It's an accusation that Greenberg vigorously denies, saying that the investments leading to the company's decline were made after his departure. (Read more about Greenberg's response to critics here.)
During his time at the company, Greenberg said, retention packages did not exist at AIG Financial Products, the Connecticut-based division of AIG now under fire for the bonuses.
"We would never have been blackmailed into such an arrangement," he said.
"I know from long experience that you don't retain people by buying them. You don't buy loyalty," he said.
A company achieves loyalty, Greenberg said, when "people believe and share the same values as you do." It's an issue of leadership, he said.
Meanwhile, President Obama said today that he has asked his Treasury secretary to "pursue every single legal avenue" to block the AIG bonuses.
"This is a corporation that finds itself in financial distress due to recklessness and greed," the president said.
"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 today during a news conference announcing an aid program for small businesses. "How do they justify this outrage to the taxpayers who are keeping the company afloat?"
At one point, Obama coughed and said half-jokingly, "I'm choked up with anger."
Obama said Treasury Secretary Timothy Geithner was working to resolve the conflict with AIG CEO Edward Liddy, who took the company's reins after the contracts allowing the bonuses were agreed to last year.
"I know he's working to resolve this matter with the new CEO, Edward Liddy, who came onboard after the contracts that led to these bonuses were agreed to last year," Obama said.
"This isn't just a matter of dollars and cents. It's about our fundamental values," he said. "All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses. All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules."
Obama said the bonuses underscore a need for overall financial regulatory reform to prevent a similar situation in the future, and "so we have greater authority to protect the American taxpayer and our financial system in cases such as this."
New York Attorney General Andrew Cuomo, who has been investigating AIG's executive compensation, sent a letter today to Liddy saying he was "disturbed" to learn of the scheduled bonuses and asked again for the names of executives who had received extra cash.
"We need this information immediately in order to investigate and determine ... whether any of the individuals receiving such payments were involved in the conduct that led to AIG's demise and subsequent bailout ... and whether such contracts may be unenforceable for fraud or other reasons," Cuomo wrote.
A source close to the beleaguered company told ABC News, "AIG gets it."
Liddy "doesn't blame people for being angry," the source said. "It's not like he woke up in October and said, 'Let's pay millions to these people!'" It's a point that Liddy will make when he testifies before Congress Wednesday.
"Everyone gets that this doesn't look good," the source added.
Not only are people outside AIG upset, but also within the company, because the same people who "tarnished" the whole company are now receiving millions, the source said.
Federal Reserve Chairman Ben Bernanke also criticized the AIG contracts in a rare interview Sunday on "60 Minutes."
But he gave Americans a glimmer of hope, saying that the recession could wind down as early as this year.
"We do have a plan. We're working on it," Bernanke said in rare interview on "60 Minutes" Sunday. "And I do think that we will get it stabilized, and we'll see the recession coming to an end, probably this year."
"We'll see recovery beginning next year," he continued. "And it will pick up steam over time."
That progress, he said, would hinge on whether the government can keep the banks from failing and if the banks, in turn, could start to lend more freely.
Outrage over AIG hasn't seemed to dampen Wall Street's spirits: The Dow Jones industrial average was up more than 40 points by the mid-morning, continuing an upswing that began early last week after Citigroup reported strong performance for the current quarter.
But Bernanke's optimism didn't take away from his anger over AIG's spending of $165 million in bonuses.
He told CBS' "60 Minutes" Sunday that out of all the events in the last 18 months, the federal government's intervention with AIG makes him the angriest, saying the company made "unconscionable bets."
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