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March 16th, 2009

Who’s Right — Washington or AIG?

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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?

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2 Responses to “Who’s Right — Washington or AIG?”

  1. Ron Says: March 17th, 2009 at 10:24 am

    I believe the bonus payout excesses at AIG are just the tip of the iceberg of what is happening with the other Wall Street bailouts including Bank of America. Working productive Americans are bailing out the same crooks that destroyed our economy along with 45% of the wealth in the world. Now the American taxpayers and our posterity will be forced to live a far lower standard of living with reduced prosperity and opportunities due to the accumulated national debt to fund the bailouts and once again we will pay the price.

    Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. I believe Washington plans to monetize the debt in future years while they tax and destroy our remaining wealth by depreciating the dollar.

    To stop this wealth attack, the Campaign to Cancel the Washington National Debt By 12/21/2012 Constitutional Amendment is beginning now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts

  2. Tim Manni Says: March 17th, 2009 at 10:38 am

    Ron,

    Thanks for your comments. Taxpayers are angry, and they deserve to be. It’s unfortunate that these bonuses are protected by contracts. Sometimes it feels as though we’re so deep in this mess we’ll never get out. I think you’re right, “the bonus payout excesses at AIG are just the tip of the iceberg.”

    Thanks again,
    Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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