AIG Bonus Money Will Be Recovered, White House Promises

NU Online News Service, Feb.3, 3:40 p.m. EST

WASHINGTON–Obama administration officials denied that American International Group had "outmaneuvered" them on bonus payment issues, and said if a proposed tax on large banks is enacted, it will ensure the bonus payments are recouped.

The comments by Treasury Secretary Timothy Geithner were made in reaction to disclosure that AIG will distribute approximately $100 million in bonuses today after winning employee consent to a $20 million cutback in that remuneration.

"These payments are tied to employment contracts from 2007 that fell outside the jurisdiction of the Special Master and the law," Mr. Geithner said in a statement.

"We are encouraged that AIG employees are making good on the repayment pledges they made last spring," he said.

Mr. Geithner's comments on the recoupment issue came during testimony before the House Ways and Means Committee concerning the president's budget.

"If you join with us in passing this proposed fee on our largest financial institutions, you'll be able to say, as we do, that the American taxpayer will not pay a penny" to reward executives at AIG and others who had a role in the financial crisis, Mr. Geithner said.

The fee to be paid by insurance companies, banks and securities firms with assets of more than $50 billion is a component of the 10-year budget blueprint proposed Monday by President Barack Obama.

It would yield approximately $9 billion in revenue annually, according to the administration's estimates. The 0.15 percent fee would be levied on the liabilities of banks and insurance firms with assets of $50 billion or more.

Criticism about the bonuses was made by Sen. Charles Grassley, R-Iowa, as Mr. Geithner testified on the budget yesterday before the Senate Finance Committee.

Sen. Grassley contended that the Treasury Department has not done enough to provide him with data on the bonus issue that he requested in December.

He said he was briefed on the issue last week by Kenneth Feinberg, the special master for bonuses, but has still not received the documents he requested last December.

"In December, I asked you for details regarding the $168 million AIG retention bonus payments paid in 2009 and the $198 million in AIG retention bonuses planned for March of this year," Mr. Grassley said.

He added, "Some of the AIG executives promised to return $45 million of the '09 bonuses, but that didn't happen. Nevertheless, AIG still planned to pay $198 million in bonuses this year [payments are supposed to be made in March]."

Sen. Grassley then said, "AIG has taxpayers over a barrel. The Obama administration has been outmaneuvered. And the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand."

Mr. Geithner responded, "I will commit to you that we will work as quickly as possible to make sure you have the information you need to provide the oversight that this committee has to provide in this issue and all other issues."

Moreover, he said, he wanted to emphasize that Mr. Feinberg, the special master for TARP executive compensation, known as the federal pay czar, "who I appointed to try and make sure we are fixing the compensation structure for this set of institutions, is working very hard on just the concern you raised, and I'm sure he'll be able to provide a little more detail in public and in writing when he's reached those judgments."

But in the interim, Mr. Geithner said, "I'll make sure we're providing the information you need and to be responsive to your questions on this specific issue."