Summers: AIG Bonuses Are "Outrageous"

By: Kevin Hechtkopf
Topics: In The News

(CBS)

Lawrence Summers, Director of the White House National Economic Council, said on CBS' Face The Nation this morning that recent bonuses paid out by insurance giant American International Group are "outrageous."

Reports came out this morning that AIG, which has received $170 billion from the U.S. government to prevent the firm from collapsing, has paid out $165 million in bonuses.

"It is outrageous," Summers told host Bob Schieffer. "The whole situation at AIG is outrageous. What taxpayers are being forced to do is outrageous."

But Summers also said that "you can't govern out of anger" and that the government doesn't have the power to stop bonuses from being paid out under existing contracts.

"If we simply throw up our hands, refuse to deal with any of this, we'll have the kind of financial catastrophe that we saw after what happened at Lehman Brothers," Summers said. "[Treasury] Secretary Geithner has negotiated very forcefully with AIG. He has done everything that is legally permissible for the government to do to limit the payment of bonuses. But where there are contracts, binding contracts that were entered into long before the government put any money in to AIG -- we're not a country where contracts just get abrogated willy-nilly."

Summers added: "And if we were to start doing that, there would be potentially very destabilizing consequences."

More from Face The Nation (3.15.09):

Summers Defends Administration's Bailout Plan

Friedman: Tom Friedman: "Fairness Has Left The Building"

Read the full transcript> (pdf file)

To watch video of Lawrence Summers on Face The Nation click below.

Kevin Hechtkopf
Kevin Hechtkopf is CBSNews.com's politics editor.
Follow on Twitter »

135 Comments Have Your Say
Email Story Send to a Friend
Share This Tell Your Friends
Tweet This Tweet This
More Share It

Add a Comment

See all 135 Comments


by taxsummers March 20, 2009 1:13 PM EDT: Lawrence Summers was Clinton's deputy treasury secretary who opposed government regulation of derivatives in which many became toxic.

Summers also received more than $100,000 in political contribution from AIG during the 2008 campaign. http://abcnews.go.com/Politics/story?id=7110145&page=1

In short, Summers was every bit a part of this mess from the beginning (just like Barney Frank and Christopher Dodd). It's disgusting to see him say that he knows best what this country needs and we should just shut up and take it.

Obama said anyone making more than $250,000 a year should bear more of the tax burden. Well, I agree. Echoing the earlier post about taxing people who receive bonuses from institutions receiving TARP funds @100%, those individuals should be humiliated in public for their incompetence and lack of virtue.

Oh btw, Fannie Mae is going to pay out more than $1 million each to executives who managed? the company to lose $59 billion last quarter. I don't expect much out of government employees, but do you really need these idiots to run the ship in this recession?
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031803188.html

I thought and skeptically believed that Obama stood for change. Now, it looks like he just meant a change in the ultra-exclusive circle of people who benefit from raping others without taking any responsibility.

I'm done with people dishing out empty promises.

Thanks for listening.; Reply to this comment


by starleo146 March 17, 2009 2:59 PM EDT: Every day the media is saying Government cannot afford not to bail out AIG, because the tentacles that branch out to other companies involved within AIG it is impossible to see it fail, it would be devastating to our economy. We have been talking about AIG since Paulsen asked for 750billion dollars and still AIG ignores the right thing to do, AIG on the first bail out took 440,000 and went on a big retreat party after Paulsen gave them 85 billion then he gave them 30 more billion and they tell us this month they lost 62billion in this quarter so we give them 60 billion more and then pay out 170,000 million in bonuses on contracts written last year I think a team of top IRS tax people should go in there, and take every company, and turn it upside down, and check there books, and and I do not see why that has not been done. If It was us they would be all over us. I see lawyers who as fast as they can for AIG are looking at our loopholes and taking advantage to there advantage and this is war with this company ,and we got to attack.; Reply to this comment


by starleo146 March 17, 2009 2:43 PM EDT: I remember when Daddy Bush push inflation up 10 or 11% the company I worked for froze our pay and it stayed frozen till in the middle of Clinton's administration and then it only was allowed 2% increase. Why can't we put a freeze on contracts to pay any bonuses till there is a turn upwards on the economy. I realize there are people on this forum that may have more knowledge than myself, another thing if we own this AIG 80 some percent why do we not go in and take it over and eventually break it down into single companies; Reply to this comment


by jnewton01 March 16, 2009 5:26 PM EDT: I am not a lawyer but I cannot understand how taxpayer dollars can be used to pay out bonuses. My understanding of a bonus is it is for performance that results in a profit. If this is true ?..then our dollars should not be used for this. The profitable area of AIG should be giving those dollars to any contract that was signed regarding a bonus.

J. Newton; Reply to this comment


by latewalker March 16, 2009 5:22 PM EDT: Stop all the shouting and just pass a law to tax bonus income in companies taking tarp money at 100%.; Reply to this comment


by noloyalisti March 16, 2009 2:54 PM EDT: We can use this fiasco to finally banish corporate personhood and get rid of all their rights. Corporations should exist for the common good of We the People. Period!; Reply to this comment


by crabbylady-2009 March 16, 2009 11:31 AM EDT: Everyone else in the world breaks contrats. Let AIG take us to court for Breech of Contract and see if a jury agrees with them.

BTW. They said they needed bonus money to keep the emplopyees they have, well I can give them names of hundreds of liars and thieves that will work for no bunus money.

What a bunch of BS this is & Lawrence Summers is an idiot for thinking we have to go along with them. If we do then pay them the money and fire their *****. We now own 80% of them so get rid of them.

Cranky Old Lady; Reply to this comment


by gary40960 March 16, 2009 9:23 AM EDT: I would love to have worked for a company that had a creteria for bonus payment that included the total distruction of the company! How the world did the employees earn a bonus?; Reply to this comment


by boosterprez1 March 16, 2009 8:59 AM EDT: For the life of me, I can't figure out why the Obama administration is so "outraged" over these bonuses...

If the administration and Congress were doing their jobs before handing any money over to AIG, they'd have KNOWN about these bonuses beforehand.

I think they DID know about these bonuses and are using them to stir up populist rage....but if they didn't, well then shame on them for handing the money over in the first place.

The time to renegotiate the bonuses should have been BEFORE the bailout was paid, not after the fact.

Leave it to the gov't....A$$ backwards as usual....; Reply to this comment


by iam4honesty March 16, 2009 8:52 AM EDT: The CEO of AIG has the authority to modify contracts, it's done all the time.; Reply to this comment