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A.I.G. to Pay $100 Million in Bonuses After Huge Bailout
http://www.nytimes.com/?emc=na
Saturday, March 14, 2009 -- 8:23 PM ET ----- A.I.G. to Pay $100 Million in Bonuses After Huge Bailout Despite being bailed out with more than $170 billion from the Treasury and Federal Reserve, the American International Group is preparing to pay about $100 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year. ------------------------------------------------------------ March 15, 2009 A.I.G. Planning Huge Bonuses After $170 Billion Bailout By EDMUND L. ANDREWS and PETER BAKER WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year. Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them. The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance. The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money. A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives. “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,” he wrote Mr. Geithner on Saturday. Still, Mr. Liddy seemed stung by his talk with Mr. Geithner, calling their conversation last Wednesday “a difficult one for me” and noting that he receives no bonus himself. “Needless to say, in the current circumstances,” Mr. Liddy wrote, “I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.” An A.I.G. spokeswoman said Saturday that the company had no comment beyond the letter. The bonuses were first reported by The Washington Post. The senior government official, who was not authorized to speak on the record, said the administration was outraged. “It is unacceptable for Wall Street firms receiving government assistance to hand out million-dollar bonuses, while hard-working Americans bear the burden of this economic crisis,” the official said. Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G. and none has infuriated lawmakers more with practices that policy makers have called reckless. The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages. The bonus plan covers 400 employees, and the bonuses range from as little as $1,000 to as much as $6.5 million. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses. Mr. Liddy, whom Federal Reserve and Treasury officials recruited after A.I.G. faltered last September and received its first round of bailout money, said the bonuses and “retention pay” had been agreed to in early 2008 and were for the most part legally required. The company told the Treasury that there were two categories of bonus payments, with the first to be given to senior executives. The administration official said Mr. Geithner had told A.I.G. to revise them to protect taxpayer dollars and tie future payments to performance. The second group of bonuses covers some 2008 retention payments from contracts entered into before government involvement in A.I.G. Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule. The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place. But the official said the administration will force A.I.G. to eventually repay the cost of the bonuses to the taxpayers as part of the agreement with the firm, which is being restructured. A.I.G. did cut other bonuses, Mr. Liddy explained, but those were part of the compensation for people who dealt in other parts of the company and had no direct involvement with the derivatives. Mr. Liddy wrote that A.I.G. hoped to reduce its retention bonuses for 2009 by 30 percent. He said the top 25 executives at the financial products division had also agreed to reduce their salary for the rest of 2009 to $1. Ever since it was bailed out by the government last fall, A.I.G. has been defending itself against accusations that it was richly compensating people who caused one of the biggest financial crises in American history. A.I.G.’s main business is insurance, but the financial products unit sold hundreds of billions of dollars’ worth of derivatives, the notorious credit-default swaps that nearly toppled the entire company last fall. A.I.G. had set up a special bonus pool for the financial products unit early in 2008, before the company’s near collapse, when problems stemming from the mortgage crisis were becoming clear and there were concerns that some of the best-informed derivatives specialists might leave. It locked in a total amount, $450 million, for the financial products unit and prepared to pay it in a series of installments, to encourage people to stay. Only part of the payments had been made by last fall, when A.I.G. nearly collapsed. In documents provided to the Treasury, A.I.G. said it was required to pay about $165 million in bonuses on or before Sunday. That is in addition to $55 million in December. Under a deal reached last week, A.I.G. agreed that the top 50 executives would get half of the $9.6 million they were supposed to get by March 15. The second half of their bonuses would be paid out in two installments in July and in September. To get those payments, Treasury officials said, A.I.G. would have to show that it had made progress toward its goal of selling off business units and repaying the government. The financial products unit is now being painstakingly wound down. Mary Williams Walsh contributed reporting. http://www.nytimes.com/2009/03/15/bu...G.html?_r=1&hp
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"MOST PEOPLE DO NOT LACK THE STRENGTH, THEY MERELY LACK THE WILL!" (Victor Hugo) |
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#2
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Why is Fed government so stupid?
As we know, any fed tax code can be change anytime. All the government has to do is to add a new tax code that any employee who receives bonus from a government bailed-out company has to pay 100% tax for this bonus.
I can not believe how incompitant this government is. I suspect the fed government really don't care about the bonus issue. They are friends of the bankers and want to give taxpayors money to these bankers. |
#3
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AIG Details Which Banks Got Its Federal Bailout Money
As AIG weathers the bad PR storm from issuing over $165 million in bonuses to executives that helped bring the company down, the insurer has released the names of the companies and municipalities it paid out. The NY Times reports that AIG repaid "Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion)" as well as foreign banks "Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion)." California and Virginia each received about $1 billion each (NY is getting $210 million). You can see read AIG's statement (PDF)—the company used about two-thirds of its rescue funds for these payments. As for the bonus outrage, Rep. Barney Frank said these execs "may have a right to their bonuses. They don't have a right to their jobs forever," adding "it does appear to be that we're rewarding incompetence." http://gothamist.com/2009/03/16/aig_...ot_its_fed.php
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#4
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AIG is not the bad people here. The government should have let AIG go bankrupt and then the binding contracts that AIG had to honor would not be binding. The Government numbers people are stupid, That's no fault of AIG. If you have a company that has contracts with it's employee's to pay them 165 million and you don't have 165 million. Now the government gives you 100 billion or so. You still have the contracts with your employee's so what are you to do. The Constitution forbids government from interfering with contracts.
Ron |
#5
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Where in the Constitution does it forbid the US Government from interfering in business contracts?
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"Facts are stubborn things; and whatever may be our wishes, our inclination, or the dictates of our passions, they cannot alter the state of facts and evidence." John Adams |
#6
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Under contract law, absent any prevailing and contrary law, that contract must stand on its merits. This gives new meaning to the phrase, ' a government of laws, not of men.' Of course if the Fudge Packer has his way, all these contracts would be ruled null and void, but sofar, he ain't the king yet.
But one must ask the question, where was the illustrious Secretary of the Treasury while all this was going on? Didn't the law give him the oversight of the bailout $$? Why wasn't he doing his job? And check his record: before his appointment, he was with a private baking firm tht got huge bonus $$ for driving the company over the cliff.
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One Big Ass Mistake, America "Political correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end." |
#7
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It was revealed this morning that AIG bonuses WERE INCLUDED IN THE ORIGINAL BAILOUT BILL THAT BARACK H. OBAMA VOTED FOR AS A SENATOR. So now, all the posturing, chest-thumping and grandstanding is nothing more than show, and I hope the AIG CEO shoves this bll right up B.O.'s half-white ass.
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One Big Ass Mistake, America "Political correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end." |
#8
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All the talk about bonuses is a distraction to keep you from looking at the funneling of our borrowed money to other banks including some in other countries!
Does anyone here remember that UBS was investigated for funneling money to terrorists and they are getting money through AIG?
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