US president Obama, Congress call for blocking of executive bonuses at AIG insurance company

Wednesday, March 18, 2009

United States President Barack Obama stated Monday that insurance giant AIG is in financial trouble due to "recklessness and greed," and called for legal action to stop the company from giving out millions of dollars in bonuses to its executives.

"It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said. "How do they justify this outrage to the taxpayers who are keeping the company afloat."

Obama's statement comes after reports surfaced last weekend saying the insurance agency, which is in deep financial trouble, had paid US$165 million to executives in bonuses, after receiving $170 billion as part of a government bailout plan.

AIG has said that the bonuses have to be given out, as the company is legally required by contract to do so. A representative with the National Economic Council, Lawrence H. Summers, also said that the bonuses were required to be given out. If AIG had refused to give out the bonuses, employees could file a lawsuit against the company for the money.

"We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury," AIG CEO Edward M. Liddy said in a letter addressed to Treasury Secretary Timothy F. Geithner on Saturday.

Liddy said that he asked Geithner "to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole."

"I want everybody to be clear that Secretary Geithner's been on the case," Obama said. "He's working to resolve this matter with the new CEO, Edward Liddy, who, by the way, everybody needs to understand, came on board after the contracts that led to these bonuses were agreed to last year."

If the bonuses cannot be stopped, the U.S. Congress says they want AIG to reimburse the government. Congress is looking to impose stiff new taxes on the pay, or ordering the company to return the money which was originally granted from a government bailout. In a letter to House Speaker Nancy Pelosi on Tuesday, senator Richard Shelby promised that the treasury will recover all of the money. Several U.S. senators along with Liddy have sent letters to AIG asking for the bonuses to be renegotiated, something AIG agreed to and says they will reduce future bonuses by 30%. Senators state that if Libby does not respond by renegotiating the bonuses, the Senate Finance Committee will propose an excise tax. Not only will an excise tax be proposed on AIG, but all companies receiving bailout money and their employees who receive bonuses.

	What is the highest excise tax we can impose that will stand up in court? Let's find out.
—Sen. Max Baucus

Numerous House Democrats have introduced legislation which would place a 100% tax on any bonuses of over $100,000 from companies that are receiving government bailout funds. Meanwhile in the Senate, a bipartisan proposal by Max Baucus (D-Montana) and Charles Grassley (R-Iowa) would levy a special 90% excise tax on AIG's bonuses. Asked Senator Baucus, who chairs the Senate Finance Committee: "What is the highest excise tax we can impose that will stand up in court? Let's find out."

Have an opinion on this story? Share it!

Sources

Shailagh Murray, Paul Kane and Michael D. Shear. "White House Calls Bonuses a Late Surprise" — The Washington Post, March 18, 2009
Helen Kennedy. "AIG bonus checks may be taxed at up to 100%, says Sen. Chuck Schumer" — Daily News (New York), March 17, 2009
John Fritze, Mimi Hall and Adam Shell. "Treasury, Congress go after AIG bonuses" — USA Today, March 17, 2009
"Geithner: AIG Will Repay Taxpayers for Bonuses" — Fox News Channel, March 17, 2009
William Kristol. "AIG Bonus Babies" — The Washington Post, March 16, 2009
Marc Ambinder. "A Modest Proposal For AIG" — The Atlantic, March 16, 2009
Michael J. de la Merced. "Cuomo Seeks A.I.G. Bonus Information" — The New York Times, March 16, 2009
Tom Raum, AP. "Obama will try to block executive bonuses at AIG" — Yahoo! News, March 16, 2009
"Obama wants AIG bonuses blocked" — Reuters, March 16, 2009
Edmund L. Andrews and Peter Baker. "A.I.G. Planning Huge Bonuses After $170 Billion Bailout" — The New York Times, March 15, 2009
Elaine Quijano. "AIG's insistence on bonuses raises ire in Washington" — CNN, March 15, 2009

Share this:

This page is archived, and is no longer publicly editable.

Articles presented on Wikinews reflect the specific time at which they were written and published, and do not attempt to encompass events or knowledge which occur or become known after their publication.

Got a correction? Add the template {{editprotected}} to the talk page along with your corrections, and it will be brought to the attention of the administrators.

Please note that due to our archival policy, we will not alter or update the content of articles that are archived, but will only accept requests to make grammatical and formatting corrections.

Note that some listed sources or external links may no longer be available online due to age.

This page is archived, and is no longer publicly editable.

Articles presented on Wikinews reflect the specific time at which they were written and published, and do not attempt to encompass events or knowledge which occur or become known after their publication.

Got a correction? Add the template {{editprotected}} to the talk page along with your corrections, and it will be brought to the attention of the administrators.

Please note that due to our archival policy, we will not alter or update the content of articles that are archived, but will only accept requests to make grammatical and formatting corrections.

Note that some listed sources or external links may no longer be available online due to age.