Obama Administration Fails to Halt AIG’s $165 Million Bonus Scheme

Monday, March 16, 2009

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President Barack Obama recently said paying bonuses to Wall Street was “shameful” while companies survive on Federal life support. But the president has discovered changing the culture of Wall Street is much more difficult than anticipated.

Case in point, the insurance giant AIG.

AIG received a staggering $170 billion dollars in taxpayer money because according to current Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretary Henry Paulson, “AIG is too big to fail,” so AIG must  be saved from bankruptcy.

But now comes news that AIG will payout $165 million in salary bonuses to the very executives in the business division responsible for wrecking the company’s finances.

Capitol Hill politicians reacted to the news with fury. In response, members of the Obama administration appeared on the Sunday morning blab circuit to insist the contracts were written during boom times — code for during the time Bush was president, so their hands tied.

Larry Summers, President Obama’s chief economic adviser, said:

“The whole situation at AIG is outrageous. What taxpayers are being forced to do is outrageous.”

But Summers added:

“We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken.”

The Federal government has pumped hundreds of billions of dollars into a financial system unwilling to regulate itself and behave in a responsible way. It is now a significant shareholder in dozens of banks and is struggling to contain public fury that companies are paying bonuses with the money.

The new Treasury Secretary, Tim Geithner, says the government would not be able to act to repair the financial system if taxpayers believe their money is being wasted. Geithner is correct. The financial system is broken but so is the American people’s trust in President Obama’s pledge to stand up the corrupt forces on Wall Street.

This entry was posted in Bailout, News, Politics, President Barack Obama, U.S. Economy, Wall Street and tagged , , , , , , . Bookmark the permalink.

27 Responses to Obama Administration Fails to Halt AIG’s $165 Million Bonus Scheme

  1. feminazi says:

    I don’t believe for a New York minute believe the Obama administration can’t exert pressure on AIG to block these nauseating executive bonuses. All it takes is the will. I am left thinking Team Obama is more concerned with currying favoritism in an industry known for making huge donations to presidential campaigns.

  2. Joe in Colorado says:

    News reports say 12 of these executives aren’t even Americans – they’re British nationals employed by AIG’s division in London. We’re fools in this country. We trusted politicians like Rep. Barney Frank and Speaker Pelosi to do what’s right for the American people and instead, the taxpayer wound up giving millions of dollars to employees from a foreign country. Tell me again, how’s this $700 billion dollar bailout working out for us?

  3. VicoDANIEL says:

    Let AIG fail. Period.

    Republicans are just God damned big fans of the “free market” so in the free market, some companies
    survive and some companies bit the dust.

    What makes AIG so special?

    vicodaniel1987@yahoo.com

  4. Obama and Geithner and Barney Frank all say they are “shocked that gambling is going on here”. These contracts were in place before Liddy was the CEO of AIG, and AIG is obligated to pay what they agreed to, whether the people are shmucks or swindlers or bums. This situation should have been addressed by Bush and Paulson and Barney Frank before the taxpayers were on the hook for anything. But the politicians were taking care of their own and they know it. Do not blame AIG for fulfilling its legally binding promises. Blame the people who gave taxpayer money to AIG knowing good and well that they were legally obligated to pay these ridiculous scandalous bonuses. Blame whoever authorized the money going to a company with these stupid deals. If giving money to AIG had to be done regardless, then so be it. Tell taxpayers the truth instead of pointing the finger at AIG. And no, The President of The United States and Congress do not, and should not, have the authority to mandate that these companies not be legally obligated to follow the law just because they got some taxpayer money. As taxpayers we should spend more time scrutinizing money being spent by our elected officials and blame them. Be angry at the politicians for allowing this to happen.

  5. Estacada says:

    Well, OK then. Here’s what should happen.

    Let AIG honor its contracts to pay these executives millions for driving the company into the ground including the British nationals.

    But when AIG comes back to the Federal trough for another sip from the remaining $350 billion dollar fund, they don’t get one, fucking red cent of my tax money. Not a cent.

    They can sell their NYC skyscraper, reorganize, spin off divisions, do whatever it takes but don’t ask the American people for another handout.

  6. woyoyo says:

    Let AIG fail. It’s no skin off my ass if they tank.

  7. bradfrmphnx says:

    I’m in line with Estacada. Because these bonuses seem to be contracturally obligated, it would seem that we must honor them. But then that’s it. Period. I’m sick of banks and financial institutions. Why are we paying almost $30.00 for a bounced check now? For all the money we’ve given them, they ought to be paying us to bounce checks. Bastards!

  8. Bel Ami says:

    Why is Bush appointee, Ben Bernanke, still the Fed Chairman? I refuse to accept in all of Washington DC, there’s no one else he could find to head-up monetary policy. Besides, isn’t Bernanke a part of the problem?

  9. Fran says:

    AIG needs to change their logo to Horsemen with a bandana covered face & pistols in hand.

    This is a new & improved version of the old train bank money heists of the Butch Cassidy & the Sundance kid era. Now they just wear suits @ congressional hearings & hold out donation cups.

    I can’t keep track anymore– did AIG double or triple dip @ the Federal trough??

    AIG released who it gave money to….
    Goldman Sachs and Merrill Lynch , received $2.5 billion and $1.8 billion.

    This makes it full circle- Hank Paulson was a Goldman Sachs former employee….. they gave money to AIG, who quietly gave Goldman Sachs a few billion, behind the scenes.

    No wonder Paulson wanted total immunity from the very beginning of this debacle!

  10. Buck says:

    “contracturally obligated”

    Good point. But then, there’s another point that can be made. People under contract are usually required to perform. And, apparently, these people failed. So, do they deserve the pay?

  11. TOM339 says:

    I’m with you, Estacada.

    AIG should go ahead and honor the bonus contracts and payout the $165 million.

    But the the price of this compensation is no more TARP money. AIG needs to decide what is more important: bonuses for failed executives or bailout money.

    The choice belongs to them.

  12. proudprogressive says:

    Buck exactly – they failed and they get bonuses ?

    contractual obligations..gimme a break , Its outrageous. There is NO excuse for it..don’t like the strings attached on the federal money i.e. cannot be used for bonuses , don’t take it.

    totally unacceptable and shame on the Obama people for colluding with this shit.

  13. libhomo says:

    The government has every right to write a law making those contract terms illegal and therefore unenforceable. Summers is evil incarnate. He should be fired immediately.

  14. I’m actually going to have to disagree with the popular rule of thought. AIG still has to fill it’s contractial obligations and there is no way around that without making AIG disapper. Yeah, it sucks but with AIG so important to the American economy we have to keep it’s afloat. However, we America now own 80% of AIG so I would assume since we own controling interest we would make sure no other contracts go through without our approval. I would also like to state the lovely point that AIG agreed to these contracts with no obligations for services rendered meaning, that yes we ruined your company but you still have to give me my bonus. The only reason AIG did this was because every single executive was doing the exact same thing. Trust me, if there is one thing AIG knows it’s contract law and their pitiful contract among themselves, was no mistake.

  15. Greg C. says:

    I take it there’s no way to charge AIG with misappropriation of funds and demand all that money back, huh?

  16. jimmy says:

    What’s crazy is these aren’t even performance bonuses, they’re retention bonuses. AIG ( and this is probably industry-wide) bribes these crooks to stay at the company because they are so ‘talented’.

  17. Jim says:

    AIG should be allowed to fail, and all those corrupt individuals involved should lose their jobs. A failure wouldn’t affect most of us any more than printing more and more currency to continually bail out these greedy thugs.

  18. Crapaud says:

    It is my understanding that the monies thus far advanced to AIG were done so by Bernanke’s Federal Reserve Bank, IN ADDITION TO the $7oo Bil bailout. Therefore, we need to NATIONALIZE the Fed Res Bank NOW. Most people don’t understand that its a private bank, with huge leeway to act for the government à la Fannie Mae and Freddie Mac.

    At any rate, NO MORE $$, €€ or otherwise in either “bailout” or Fed Reserve salve, should be allocated to AIG without legally deducting the amounts of the bonuses and, through involuntary bankruptcy if necessary, voiding the contracts that are not sacrosanct as they have become contra bones mores.

    Just my humble legal opinion, tempered somewhat by my gay-activist, radical political sensibilities.

  19. proudprogressive says:

    I just read breaking news, Obama will block the money if it goes to bonuses..

    I tell that man has got to get the bankers out of that cabinet these fuckers created this problem. Let em go down. We need to get smaller and local.

    Paulson ought to be behind bars.

    lets see, …Obama has got to pull this off, and the dems had better not stop him. This wholesale billions crap to the banks is not the right medicine – we the people NEED RESTITUTION – no more 401 ks no more – bullshit. Smaller , money good banking, economics 101 –

    we do it with our check books – let the bohemeths crash and burn and then go press charges and FIND THE MONEY and return it to the people – thus creating thousands of new jobs with the IRS.

    fuckin Congress. They should all eat spam while in session.

  20. Prairiedog says:

    NBC and MSNBC keeps playing this segment of Rep. Barney Frank, I guess from an appearance on the Today program.

    Frank says something like, “AIG’s executives may be entitled to the bonuses thanks to contracts but they’re not entitled to their jobs.”

    While I appreciate the populist ring, wasn’t Frank one of the champions of bailing out Wall Street to the tune of $700 billion? Maybe it’s Rep. Frank who doesn’t deserve his job?

  21. Brigadoon says:

    I saw that GOP shill, Chuck Todd on MSNBC when I got home say, these bonuses aren’t being paid out of TARP funds but directly from the Treasury. If this is true, then there can’t be a legally binding contract to reward failure because the Treasury’s lawyers would never have entered into such an agreement in the first place. Larry Summers has only been around 6 weeks, so he’s either lying on the spot or confused.

  22. Great post. One comment I have: given their complete failure, why in the world are these assholes being given retention bonuses? Who the fuck will hire them? Is there even a solvent financial firm out there that could consider it?

  23. Randy Arroyo says:

    The bailout was a joke from the start. I appreciate the fact you spoke out against it and never wavered. I wrote both my US Senators (Boxer and Feinstein) and politely asked them to explain how the $700 billion dollar figure was arrived at and what did they base their sense of urgency on. Predictably, I heard crickets from them. I concluded they had no answer either but they both voted for it. So it looks like the American taxpayer was once again played by the people we elect to represent our interests.

  24. JollyRoger says:

    There have been pensions eviscerated, homeowners left destitute, and economies flushed down the shitter-and NONE of this was a breach of contract? No. Wrong answer. Dodd has the right idea-pass a law to tax the bonuses right back into the Treasury.

    And to the (R) who seems to think that we just have to let these thieves off the hook because they’re so “important” to our economy, I suggest that you check where AIG has used its bailout money. And then STFU.

  25. Fran says:

    Summers added:

    “We are a country of law.

    HA! Not since Bush stole the election in 2001.

  26. Nice post! Keep it real.I have looked over your blog a few times and I love it.

  27. RealWorldRadical says:

    If they fail to honor contractual obligations without a law behind them the lawsuit will cost a lot more than $165,000,000.

    And the argument they didn’t earn them would have to be made on a case by case basis.

    You have to re-write the laws; you can’t just ignore any law you don’t like.

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