Return bonuses or no bailout, AIG told
Wednesday 18th March 2009, 10:20AM GMT.
AIG has been warned it must eventually reimburse the $165 million in bonuses it intends to pay staff to the US taxpayer if it is to receive any further bailout funds.
The insurer, the world’s largest, has provoked ire stateside after insisting it was legally obliged to payout the bonuses despite already receiving $173 billion in government bailouts.
Treasury secretary Timothy Geithner said on Tuesday he would take “aggressive efforts” to recover the bonuses.
In a letter to Congressional leaders Mr Geithner said: “We will impose on AIG a contractual commitment to pay the treasury from the operations of the company the amount of the retention awards just paid.
“We… want to ensure that taxpayers are compensated for any monies we cannot recover,” he said.
New legislation to compel AIG to return the bonuses is expected to be put before Capitol Hill later this week.
Barack Obama had told a news conference earlier this week that he was “choked up with anger” at the bonus issue, which echoes problems faced by the British government over bonuses at Royal Bank of Scotland.
“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” the US president said.
“How do they justify this outrage to the taxpayers who are keeping the company afloat?”
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I can understand that these bonus may be paid out to agents of AIG but not to the executives. These companies such as AIG are financial planners and risk managers. The fact that they even asked for a bailout should be indicitive of their current wisdom and lack of the ability to service their customers needs in risk management and future financial planning. If you, as a risk management firm cannot forecast a enormous situation like this you should not be in control of the future of the American peoples financial future either. The government needs to freeze all of their assets and divide the risk over the stronger companies to create a smaller risk pool and give the ability of these new companies to diversify these funds to create a more stable market.
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