US president Obama, Congress call for blocking of executive bonuses at AIG insurance company
Wednesday, March 18, 2009
United States Barack Obama stated Monday that insurance giant 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 paid165 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, 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 CEOsaid in a letter addressed to Treasury Secretary 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 Speaker Nancy Pelosi on Tuesday, 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 . 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( - ) and ( - ) 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."
- Shailagh Murray, Paul Kane and Michael D. Shear. "White House Calls Bonuses a Late Surprise" — , March 18, 2009
- Helen Kennedy. "AIG bonus checks may be taxed at up to 100%, says Sen. Chuck Schumer" — , March 17, 2009
- John Fritze, Mimi Hall and Adam Shell. "Treasury, Congress go after AIG bonuses" — , March 17, 2009
- "Geithner: AIG Will Repay Taxpayers for Bonuses" — , March 17, 2009
- William Kristol. "AIG Bonus Babies" — , March 16, 2009
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- Tom Raum, AP. "Obama will try to block executive bonuses at AIG" — , March 16, 2009
- "Obama wants AIG bonuses blocked" — , March 16, 2009
- Edmund L. Andrews and Peter Baker. "A.I.G. Planning Huge Bonuses After $170 Billion Bailout" — , March 15, 2009
- Elaine Quijano. "AIG's insistence on bonuses raises ire in Washington" — , March 15, 2009