WASHINGTON — Talking tougher by the hour, livid Democrats confronted beleaguered insurance giant AIG with an ultimatum Tuesday: Give back $165 million in post-bailout bonuses or watch Congress tax it away with emergency legislation.
Republicans declared the Democrats were hardly blameless, accusing them of standing by while the bonus deal was cemented and suggesting that Treasury Secretary Timothy Geithner could and should have done more.
Geithner sent a letter late Tuesday to congressional leaders informing them that he was working with the Justice Department to determine whether any of the AIG payments could be recovered. He cited a provision in the recent economic stimulus law that gave him authority to review compensation to the highest-paid employees of companies that already have received federal assistance.
Fresh details pushed outrage over AIG ever higher: New York Attorney General Andrew Cuomo reported that 73 company employees received bonus checks of $1 million or more on Friday. This at a company that was failing so spectacularly that the government felt the need to prop it up with a $170 billion bailout.
The financial bailout program remains politically unpopular and has been a drag on Barack Obama's new presidency, even though the plan began under his predecessor, George W. Bush.
White House officials said Geithner told the White House about the bonus payments on Thursday, and senior aides informed the president later that day.
AIG chief executive Edward Liddy can expect a verbal pummeling today when he testifies before a House subcommittee.
On Capitol Hill late Tuesday, House Democrats directed three powerful committees to come up with legislation this week to authorize Attorney General Eric Holder to recover massive bonus payments made by companies like the ones paid last week by American International Group Inc.
Senate Democrats, meanwhile, suggested that if the AIG executives had any integrity, they would return the $165 million in bonus money.
A proposal from Senate Finance Committee Chairman Max Baucus, D-Mont., and the panel's ranking Republican, Charles Grassley, R-Iowa, would levy an excise tax on both AIG and the executives who received the payments, adding up to more than 90 percent of the total of the bonuses.
Similar proposals taking shape in the House would target as much as 100 percent of the bonus money, which was distributed to the 73 AIG employees in sums ranging from $1 million to $6.4 million, according to Cuomo.
But House Ways and Means Committee Chairman Charles Rangel, D-N.Y., raised doubts about the tax idea. "It's difficult for me to think of the code as a political weapon," Rangel said.
In addition to the $165 million already paid to AIG employees, including 11 who have already left the company, a further $230 million in bonus payments are scheduled to be made next year, according to Senate Democratic leaders.
Information from the Washington Post was used in this report.
New scare for firms
The firestorm over bonuses paid by insurance giant AIG has triggered alarm at other financial firms, threatening federal efforts to draw private investors into economic recovery programs.
Officials at the Federal Reserve and the Treasury Department are worried that the controversy could discourage investors from joining a new government effort to revive consumer lending as well as a separate plan that relies on private money to buy toxic assets from banks, sources familiar with the matter said.
The attack by lawmakers on AIG pay has provoked renewed complaints from some financial company executives that federal involvement in business decisions is making it difficult for struggling firms to return to profitability. Executives say they need to offer bonuses to keep and motivate their most valuable employees.
Cashing in in Britain
The disgraced banker at the center of Britain's biggest compensation controversy has received a $4 million tax-free advance from a pension package negotiated while his company was on the verge of a public bailout, a government minister said Tuesday.
The amount represents only a fraction of a $23 million retirement package that entitles Fred Goodwin, the former head of the Royal Bank of Scotland, to an annual payment of about $1 million a year.
The generous payout to an executive who brought one of Britain's biggest banks to the edge of collapse has sparked public outrage here akin to U.S. anger over the bonuses awarded to employees of giant insurer AIG.
Los Angeles Times
Pay to banks faulted
Every day, insurance companies sell policies to homeowners to cover the cost of damage in the case of fire. Why would those companies agree to pay out in full to a policyholder even if a fire had not occurred?
That is the type of question being asked about the federal government's bailout of AIG in which the insurance company funneled $49.5 billion in taxpayer funds to financial institutions, including Deutsche Bank, Goldman Sachs and Merrill Lynch. The payments, which amount to almost 30 percent of the $170 billion in taxpayer commitments provided to AIG since its near collapse last September, were disclosed by the company on Sunday.
Critics argue that the government's decision to pay buyers of AIG credit insurance in full and across the board was an inappropriate use of taxpayer money.
New York Times