Who’s Right — Washington or AIG?by Tim Manni
President Obama announced today that he will attempt to block the millions in bonuses that AIG plans on doling out to certain employees. The president had harsh words for the insurer who has received $173 billion in bailouts from the U.S. Treasury in the past six months:
“This is a corporation that finds itself in financial distress due to recklessness and greed,” Obama told politicians and reporters…
“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?”
The president said he has asked [Treasury Secretary Timothy] Geithner to “pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”
Even New York Attorney General Andrew Cuomo is putting the heat on AIG:
New York Attorney General Andrew Cuomo sent a letter Monday to AIG informing the company that it must immediately present a list of the employees who are to receive bonus payments and details about their performance and roles at the company.
The office is now demanding that list as well as additional information about these employees and their positions with the company by 4 p.m. New York time today, or the office will issue subpoenas and seek court enforcement of the request.
“Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial systems,” Cuomo said, in the letter.
But AIG defends that these bonuses, or “retention payments,” are part of “binding legal obligations of the company.” The insurer explains that they will inherit severe legal consequences if they do not pay.
Yesterday, White House Economic Adviser Larry Summers said the legal contracts were already in place before AIG “became a ward of the state.” Both Summers and Geithner seem to agree that there is little Washington can do to stop these bonuses.
Should the president be entitled to lawfully block AIG’s bonuses, or should the company be able to offer these “retention payments” without fearing governmental retaliation?