Top AIG execs agree to give back bonuses

 

Top executives at American International Group Inc. have agreed to give back their bonuses, according to New York Attorney General Andrew Cuomo.

So far, nine of the top 10 bonus recipients at AIG (NYSE: AIG) have agreed to return their bonus money, and 15 of the top 20 executives on the bonus list will repay the money. Cuomo said the money being returned represents about $50 million of the total $165 million bonus pool. Continue reading

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Obama says treasury secretary’s job is secure

In interview, Obama says Treasury chief Geithner’s job is safe; responds to Cheney criticism

WASHINGTON (AP) — President Barack Obama says treasury secretary is one job that’s not up for grabs.

In an interview with CBS’ “60 Minutes” Obama said that if Treasury chief Timothy Geithner offered his resignation, the answer would be, “Sorry buddy, you’ve still got the job.”

Obama also took the opportunity to strike back at recent comments by former Vice President Dick Cheney, who claimed that plans to close the Guantanamo Bay detention center will make the U.S. less safe. Continue reading

AIG: Congress Passes Tax, Refuses to Demand Recall of Executive Bonuses

          

It appears that the political subterfuges in the AIG fiasco just keep pouring from the Halls of Congress and Capitol Hill now daily.

The most recent word is that Congress has overwhelming passed a bill which now will tax the bonuses recently handed over to the executives of AIG by the Executive Office’s lackey, Timothy Geithner, last Sunday. It appears maybe this is Mr. Obama’s answer to “pursuing every legal course available” in order to “get back” those bonuses. The tax measure was passed again in haste by Congress, and was reported to involve a 90% return to the U.S. Treasury of the sums afforded those executives, many of which received literally millions in claimed unpaid bonuses.

You do the math. 10% of 20 million dollars (the amount of bonuses paid, after all, were over 165 million) is still 2 million dollars. Add interest since those sums will not be due for another year at the U.S. rate of interest and you have a pretty sizeable bonus (not to mention most of those sums will go to the Caymans). In fact, I wonder if the amounts of those bonuses weren’t inflated to begin with in order to provide such a cushion to those executives for just such a maneuver.

Not to mention the fact that within the terms of that bailout, Congress actually disempowered themselves from any such actions against the Executive branch to whom they acceded all power and control over the distribution. This move now is a corporate tax attorney’s dream, and by the time it winds its way through the courts when those executives challenge such a move, their interest and profits will have quadrupled on those original illegally distributed bonuses.

And Mr. Obama is, after all, a lawyer – although appears to be so far no Constitutional lawyer, so as such well aware that these executives can use such loopholes to eventually avoid repayment fighting through the U.S. Tax Courts if U.S. citizens (then again, since AIG is a global concern and now even “corporate” foreigners have been given “rights” simply intended for the American citizens by the founders, even that little technicality I’m sure at this point would be overlooked).

The spins now are getting to the point where most Americans are not simply outraged anymore, they are nauseous.

By Betsy Ross

AIG CEO asks employees to repay some bonus money

The head of the insurance giant American International Group has used testimony before a US House of Representatives sub-committee to defend his actions since taking the job back in September. Edward Liddy, who has come under fire for the payment of more than 160 million dollars in taxpayers’ money to top executives at AIG, said he would not have approved them had he been CEO when the contracts were signed. He also said he had asked some of those who received bonus payments of 100 thousand dollars or more to partially return them. AIG has drawn intense fire from the public and politicians in recent days for paying out the bonuses after the government was forced to step in with a 180-billion-dollar bailout.

AIG Employees Asked to Return Bonuses Amid National Anger

The head of financially troubled insurance giant American International Group (AIG) on Wednesday called on top-earning employees to voluntarily return at least half of the bonuses.

Some employees have already stepped forward to give money back, said Edward Liddy, chairman and chief executive officer of AIG, while testifying under oath at a congressional hearing.

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The bonuses could be defended legally as a legal obligation of the company, Liddy told a House subcommittee.

But he said that given the national uproar, he asked those who got “retention payments” over 100,000 dollars to return at least half of it.

Also on Wednesday, U.S. President Barack Obama said he will ask Congress to pass legislation giving the administration greater regulatory authority over financial institutions like AIG.

He and members of his economic council have started talks with leading lawmakers on such a legislation, said the president at the White House before.

Obama once again assailed AIG’s business practices and the millions of dollars in executive bonuses it paid out even as it was 170 billion dollars in debt to government bailouts.

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He said he was not trying to quell public anger over AIG. “I think people have a right to be angry. I’m angry,” he said.

Charles Rangel, chairman of the Ways and Means Committee of the U.S. House of Representatives, said Wednesday that the House plans to take up a bill Thursday that would impose a 90 percent tax on bonuses paid to top-earning employees at AIG and other companies receiving big government bailouts.

Under this bill, tax would hit employees who are making more than 250,000 dollars a year, the head of the tax-writing committee said.

The bill would set a 5-billion-dollar threshold for companies to be covered. It would exclude community banks and other smaller companies that have received bailout money from the government.

The AIG, which is now 80-percent owned by the U.S. government, lost 61.7 billion dollars in the fourth quarter of 2008, marking the largest corporate loss in history.

Having taken over 170 billion dollars in federal bailout money since the financial crisis erupted late last year, the ailing insurer is paying hefty awards to its executives.

It distributed 55 million dollars in December and 165 million dollars had to be paid this month.

Liddy, who took over as AIG chief at the request of the government, acknowledged to the committee Wednesday that “we are meeting today at a high point of public anger.”

While AIG has been the recipient of generous amounts of governmental financial aid, the company’s leaders “have to continue managing our business as a business — taking account of the cold realities of competition for customers, for revenues and for employees,” he said.

“Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful,” said Liddy, who is not getting a bonus.

According to news reports, the retention payments were not Liddy’s idea. The deals were cut early 2008, long before Liddy was asked by the administration of President George W. Bush, Obama’s predecessor, to take over AIG.

“I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them,” Liddy wrote to Obama’s Treasury Secretary Timothy Geithner over the weekend.

Geithner himself is now under intense pressure for having failed to stop the AIG bonus payments.

But Obama defended him on Wednesday, saying “he is making all the right moves in terms of playing a bad hand.”

It was up to the government and Congress to give the secretary the regulatory tools to work through the nation’s current economic crisis and to make sure it is not repeated, the president said.

In a letter to House Speaker Nancy Pelosi on Tuesday, Geithner said AIG will be required to reimburse the government for hefty executive bonuses in order to get additional bailout funds.

“We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company in the amount of the retention awards just paid,” said the secretary.

“In addition, we will deduct from the 30 billion dollars in assistance an amount equal to the amount of those payments,” he said.

Geithner also said that Obama had asked him “to fully review all additional measures at my disposal to recoup these bonuses and to recover funds on behalf of taxpayers.”

Meanwhile, the secretary said he would “work with” Edward Liddy” on measures to wind down the AIG in an orderly way and protect the American taxpayer.”

(Xinhua News Agency Marc h 19, 2009)

 

When Obama’s cool isn’t cool

Everyone is aghast at the AIG bonuses. It would be nice if the president could show a little anger about the situation too

 Back in 1981, shortly after Ronald Reagan took office, America’s air-traffic controllers (the Patco union) went out on strike over their incredibly stressful working conditions and pay. Reagan, rather than negotiating with the union, just fired them. It was a legal move (there are laws prohibiting vital public employees from striking). It was tremendously controversial in the press, but since unions weren’t winning many popularity contests in those days, a solid majority of public opinion backed Reagan.

Now Barack Obama faces his Patco moment. If a fire hadn’t been lit under him before about the scandalous AIG bonuses revealed over the weekend, then it certainly was by this headline across the front page of this morning’s Washington Post: Anger over firm depletes Obama’s political capital. The first paragraph makes matters pretty clear:

President Obama’s apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.

Lawmakers in both parties, like the public in general, are aghast at the bonuses, and at the fact that treasury secretary Tim Geithner approved them. Obama yesterday morning announced he was instructing Geithner to find a way for the government to stop the bonus payments. But why did it take a firestorm that couldn’t have been very difficult to predict for Obama to take this step?

Here’s the downside of Obama’s famous cool. Most of the time, it’s good to have a president who isn’t a captive of his emotional temperature and doesn’t say rash things. Americans got pretty tired of that over the last eight years.

But sometimes, geez, you just want the guy to let it out. Yesterday’s press conference was about as close as he came to anger, but it wasn’t close enough.

Now, the administration will have to find a way to fight these bonuses. Rest assured that someone in treasury will, later this week, miraculously locate a provision under which the government can seek to void the contract.

But here’s where this situation is different from the one Reagan faced, and it’s a very important difference and a thorny one for Obama. Reagan had the law on his side. Obama probably does not. A contract’s a contract. Depending on your mood it’s either amusing or appalling to read AIG boss Edward Liddy’s letter to Geithner from last week in which he wrote that “honoring contractual commitments is at the heart of what we do in the insurance business”.

Insurance companies screw little people all the time, but huge firms with sharp lawyers, well, that’s another matter. And so we also have today Andrew Ross Sorkin in the New York Times arguing that the government risks setting a dangerous precedent if it voids the contracts:

If government officials were to break the contracts, they would be ‘breaking a bond’, Ms Meyer says. ‘They are raising a whole new question about the trust and commitment organizations have to their employees.’ (The auto industry unions are facing a similar issue – but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)

But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: AIG built this bomb, and it may be the only outfit that really knows how to defuse it.

AIG employees concocted complex derivatives that then wormed their way through the global financial system. If they leave – the buzz on Wall Street is that some have, and more are ready to – they might simply turn around and trade against AIG’s book. Why not? They know how bad it is. They built it.

Lovely thought.

But the administration has no political choice now. How much damage did the Obama folks do to themselves over the weekend with their passivity? A fair amount I’d say. Most of it can probably be undone with a tough posture now. Results are what matter to most people. If at the end of the day the bonuses aren’t paid, most voters (and legislators) will be satisfied.

Then again, what if the administration loses in court, which seems entirely possible? I guess if I were in the press shop, I’d spin that at least we tried. We went up against a legal system that’s rigged for big corporations. And then hope for the best. Of course, a judicial outcome could take years, and the public perception of AIG fighting in court for piggy bonuses might be such that they wouldn’t even bother if the government forced their hand.

And what Obama ought to learn from this personally is that there are times when cool isn’t cool. If people are angry, he’d better get angry too.

AIG bonuses leave Obama in a tough spot

AIG bonuses leave Obama in a tough spot

As outrage boils over the bonuses promised to executives at AIG, the ailing insurance giant that has received a massive federal bailout, President Obama finds himself in a precarious political position.

If the public, and their elected representatives in Washington, conclude that Mr. Obama and his administration did not do everything in their power to halt the bonuses, that could hinder the government’s ability to gain congressional approval for future measures aiming at righting the struggling economy. Obama’s entire agenda could be at risk, some analysts have suggested.

But the president is unlikely to deplete his political capital completely. Obama has shown, during both his campaign and the opening weeks of his presidency, a responsiveness to criticism and a willingness to change course that could, once again, keep him on track. Over the weekend, the message from various Obama administration officials was, essentially: “There’s nothing we can do about the AIG bonuses. A contract is a contract.”

Come Monday, Obama demonstrated that there was something to be done: Try to shame AIG execs into turning down their “retention payments.” Instead of allowing himself to be engulfed by populist outrage, Obama joined the chorus. He ordered his Treasury secretary, Timothy Geithner, to try again to find a legal way to block the $165 million in bonuses. And even though that still seemed impossible by day’s end, administration officials were saying that the Treasury Department was working on recouping the cash by retooling the terms of the latest infusion of federal cash, $30 billion, granted to AIG.

“If Obama had stuck with his original position … that would have been highly problematic,” says Darrell West, director of Governance Studies at the Brookings Institution. “But now they seem to be shifting to a more aggressive stance … by employing the shame strategy.”

The administration is “hoping that there’s enough public pressure and late-night comedy pressure to force voluntary action from AIG,” Mr. West adds. “The longer this stays in the news, the greater the chance that effort will be successful. A company is ready to take one day of bad news, but when it gets to be two, three, four days, they capitulate.”

At this point, facts seem to be less important than public perceptions. And in fact, AIG has already stated that it is seeking ways to repay the American people for what it calls “retention payments” to employees. In a letter to Treasury secretary Geithner, AIG chairman Edward Liddy laid out ways the company is reducing compensation to employees, especially those in the Financial Products division that engaged in the risky behaviors.

But for AIG, the damage is already done. It has become the face of corporate greed, and Obama is doing all he can to convince Americans that he’s as outraged as they are. On Thursday, he will appear on “The Tonight Show with Jay Leno” to talk about the economy, and it’s a safe bet that AIG will come up. Obama gets plenty of face time in the political media, and on cable TV, but by setting a new precedent – he will be the first sitting president to appear on late-night TV – he is going beyond the usual audience of political junkies and policy wonks and reaching out to “real America.”

Obama may also get some help from New York State’s attorney general, Andrew Cuomo, who has launched an investigation into the bonuses and threatened a subpoena to AIG to get a list of the names of bonus recipients. If Mr. Cuomo is able to get the names and they are publicized, the shame tactic could reach a new level.

In the meantime, members of Congress and interest groups are also joining the populist wave. One House member, Rep. Gary Peters (D) of Michigan, has introduced legislation that would recover the full value of the bonuses through a surtax.

One of the nation’s largest labor unions, the Service Employees International Union, announced protests to take place Thursday at financial institutions around the country. The union and other organizers say 10,000 Americans will take part in more than 100 protests in more than 30 states. The protests will call for banking reform and universal healthcare, and also show support for a controversial measure now before Congress called the Employee Free Choice Act, aimed at making it easier to form unions at businesses.

On Tuesday, House Republican leader John Boehner of Ohio expressed outrage over AIG at a press conference.

“Two weeks ago, the president’s spokesman said that they were confident that they knew how every dime was being spent at AIG,” said Mr. Boehner. “Well clearly, they didn’t know what they were talking about.”

In the past, Boehner has blamed both the Obama administration and the administration of George W. Bush for not putting forth an “exit strategy” that would put an end to government bailouts of private business.

Obama himself has repeatedly made clear that he inherited the bailout of financial institutions from Bush. But with each passing day, Obama takes on political ownership of the nation’s financial crisis.

“The initial steps to take over AIG happened on Bush’s watch, and to me, that’s the finest line of all – putting some of the blame where it belongs without looking like you’re shirking responsibility,” says Jennifer Duffy, a political analyst at the Cook Political Report. “I think that’s a line they have walked on the economy from Day 1.”