Two senior members of the House Financial Services Committee asked the Treasury Department and the Federal Reserve System yesterday to substantively increase their oversight of the activities of troubled insurer American International Group.
They asked that, by the end of January, the Treasury Department and the Federal Reserve detail for them, in writing, the systems of review and oversight that have been established for AIG and the agencies' efforts and plans to keep Congress informed of this oversight.
Rep. Paul Kanjorski, D-Pa., and Joseph Crowley, D-N.Y., also asked Treasury officials to provide information to Congress on how it is enforcing the executive compensation restrictions mandated for recipients of the Federal Troubled Asset Relief Program funds.
The letter was sent to Treasury Secretary Henry Paulson Jr. and Federal Reserve Chairman Ben Bernanke.
Rep. Kanjorski has the authority to play a key role in pushing federal officials to increase scrutiny of AIG through his role as chairman of the Capital Markets Subcommittee of the Financial Services Committee.
The two congressmen contend that the Treasury and Fed are not effectively monitoring AIG despite the fact the government is providing a $150 billion-plus lifeline to it while it sells off assets to repay taxpayers.
Their letter followed a letter several weeks ago to AIG criticizing its decision to pay retention bonuses to employees and to accelerate payment of these deferred compensation plans and to pay out some $367 million to several thousand current and former AIG employees and agents during the first quarter of 2009.
As a result of the letter, AIG and the employees agreed to defer payment of $93 million the company planned to pay them this quarter from the deferred comp plans.
More than $90 million of the accelerated deferred compensation was scheduled to go to former employees and agents who have since agreed to defer the payments.
AIG also identified approximately $3 million in deferred compensation that would go to several of the top 17 AIG executives that are subject to the most extensive compensation/severance restrictions under AIG's agreement with the Treasury Department. As a result of the letter, the executives decided to defer accepting the funds.
"While we are pleased with AIG's cooperative response to our inquiries, we are concerned with the oversight of AIG by the Treasury Department and the Federal Reserve," the letter said.
It added, "We are struck by how minimal review and three phone calls from staff resulted in AIG's decision to reduce its accelerated deferred compensation plan by $93 million so those resources are available for use by creditors of AIG–the American taxpayers–should that situation arise."
AIG has defended the retention bonuses, saying they are necessary to remain competitive and retain talent. The company in recent weeks has seen a steady stream of executives defecting to other firms.
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