Pay czar Feinberg looks at over $200 million in AIG bonuses

NEW YORK -- In what could be his first test in office, pay czar Kenneth Feinberg will decide whether to give beleaguered global insurer American International Group approval to pay out $2.4 million this week, and another pending $235 million in retention bonuses in coming months, to its employees.

When AIG paid $165 million in retention bonuses in March, there was widespread public outrage because the government had bailed it out with more than $180 billion in taxpayers' money. CEO Edward Liddy appealed to employees to return at least half of those bonuses as he was given a dressing down by lawmakers at a congressional hearing. Liddy has since decided to step down.

This time, AIG is seeking administration approval before giving bonuses.

"After being under siege last time, AIG wants the government to give some sort of political protection before paying out its contractual deferred compensation," says Andrew Samwick, a professor at Dartmouth College.

AIG spokeswoman Christina Pretto wouldn't comment except to say: "We all have the same objective, which is to restore AIG, repay taxpayers and reduce risk."

The latest Treasury compensation rules for companies that have received government funds "prohibits" any bonuses or retention awards to "highly compensated employees" and "senior executive officers." However, it is Feinberg's job to review any bonus structures that were awarded before Feb. 17 and also "where appropriate, negotiate appropriate reimbursements to the federal government."

Feinberg didn't return calls seeking comment. But Treasury spokesman Andrew Williams said in a statement: "Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk-taking and reward performance for their top executives. … Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."

The Obama administration had to take some heat for allowing the bonus payments in March, especially since President Obama had chided Wall Street for excessive pay. Since then, the administration named Feinberg to oversee and review payments and compensation plans for the executives and the 100 most highly compensated employees at companies that received government aid.