AIG Rushing Out $165M In Bonuses

(AP)  American International Group is paying out millions of dollars in executive bonuses to meet a Sunday deadline. But the troubled insurance giant has agreed to administration demands to restrain future payments.

The Treasury Department determined that the government did not have the legal authority to block the current payments by the company that has already received more than $170 billion in U.S. support.

AIG declared earlier this month that it had suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

Treasury Secretary Timothy Geithner has asked that the company scale back future bonus payments where legally possible, an administration official said Saturday.

This official, who spoke on condition of anonymity because of the sensitivity of the issue, said Saturday that Geithner had called AIG Chairman Edward Liddy on Wednesday to ask that Liddy renegotiate AIG's current bonus structure.

Geithner termed the current bonus structure unacceptable in view of the billions of dollars of taxpayer support the company is receiving, this official said.

In a letter to Geithner dated Saturday, Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

Liddy said in his letter that "quite frankly, AIG's hands are tied" although he said that in light of the company's current situation he found it "distasteful and difficult" to recommend going forward with the payments.

Liddy said the company had entered into the bonus agreements in early 2008 before AIG got into severe financial straits and was forced to obtain a government bailout last fall.

The large bulk of the payments at issue cover the AIG Finance Products Unit. This was the unit that sold credit default swaps, the risky contracts that caused massive losses for the insurer.

A white paper prepared by the company says that AIG is contractually obligated to pay a total of about $165 million of previously awarded "retention pay" to employees in this unit by Sunday, March 15. The document says that another $55 million in retention pay has already been distributed to about 400 AIG Finance Products employees.

The company says in the paper it will work to reduce the amounts paid for 2009 and believes it can trim those payments by at least 30 percent.

Bonus programs at financial companies have come under harsh scrutiny after the government began loaning them billions of dollars to keep the institutions afloat. AIG is the largest recipient of government support in the current financial crisis.

AIG also pledged to Geithner that it would also restructure $9.6 million in bonuses scheduled to go a group that covers the top 50 executives. Liddy and six other executives have agreed to forgo bonuses.

The group of top executives getting bonuses will receive half of the $9.6 million now, with the average payment around $112,000.

This group will get another 25 percent on July 14 and the final 25 percent on September 15. But these payments will be contingent on the AIG board determining that the company is meeting the goals the government has set for dealing with the company's financial troubles.

The Obama administration has vowed to put in place reforms in the $700 billion financial rescue program in an effort to deal with growing public anger over how the program was operated during the Bush administration.

That anger has focused in part on payouts of millions of dollars in bonuses by financial firms getting taxpayer support.

In his letter, Liddy told Geithner, "We believe there will be considerably greater flexibility to reduce contractual payments in respect of 2009 and AIG intends to use its best efforts to do so."

But he also told Geithner that he felt it could be harmful to the company if the government continued to press for reductions in executive compensation.

"We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses, which are now being operated principally on behalf of the American taxpayers - if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury," Liddy said.

[starleo146]

The company that is causing all this trouble is in the state of Connecticut and the chairman of banking committee is Chris Dodd of Connecticut. I do not care if he is a democrat if he had any way to protect this company in his state he needs to resign as well,I am sick of the buddy, buddy system. In the stimulus bill they had a provision to stop these bonus payouts but some deal was made in the back room. The taxpayer who have lost there homes and there jobs and there retirement 401k had no way to make any deals. Right from the beginning when they Bush ,Paulsen yelled the sky is falling had no solution ,the republicans saying NO NO No no help given at all and the democrats just not looking at the bills they are giving the president to sign . Congress is much to blame as anyone too busy trying to play politics. sick of it

[starleo146]

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.
Posted by starleo146 at 3:10p.m. : Mar 17, 2009

[myopinion4once]

Apparently you did not check out the link to the news broad cast. The Democrats controled congress and the Republicans did not feel they had enough votes to pass any regulations. Also don't forget that Obama was one of the Senitors that received huge payouts from Fanie Mae and Freddie Mac.

[Tarponsprings]

Why is anyone surprised by AIG's actions? They are taking this play from our own Congress' playbook. Did anyone notice that the thieves in Congress just got another automatic pay raise? If any group of people deserve to be fired, it's the good old boys in the House & Senate. Their inaction over the past 10 years is what caused the current economic mess that we find ourselves in.

I had to laugh when Barney Frank scolded AIG yesterday. Barney is the most guilty of any of these bums, telling Fannie & Freddie to lend to anyone who was breathing.

Nothing is going to change until term limits are imposed on Congress, and campaign contributions are limited to reasonable amounts. Unfortunately, Congress has to impose term limits on themselves, which is never going to happen. The only other method to do this would be for someone like Warren Buffet to start a National grass roots campaign to get term limits on a National ballot, as a Constitutional amendment.

Our founding fathers must be spinning in their graves...

[Whist34]

#1 The details of these contracts should be released for public review. I can't imagine a company contract that guarantees bonus pay for failure to meet the requirements for the bonus pay. And if they did meet the requirements then they need to check the education credentials of the people drafting the contracts or perhaps find some criminal fraud charge to lay at their feet.

#2 I want names. Who are these people and where are they going to go to work next? I certainly don't want to do business with any company even remotely associated with them.

[jasmccody]

In this time of economic stress the last thing we need is to hear that the money given to AIG or any other company, was to pay bonus money per a contract that was written prior to the bailout.
Bonuses usually are paid on profits, obviously they are not making profits if they are borrowing money to make ends meet.
Let them sue is there a judge in this country that would award them the money under the circumstances? If so he is not for the people, but against the people.

The rest of us aren't getting our Bonus money due to the economy, why should anyone in a company whose profits are down.

[whatever47]

Lets not forget the republicans had total house control since 2003-2007, some kind of regulations could have passed, why didnt they do anything then? They are the ones who killed the bill to regulate

[dougnshannon]

As a republican I am not very pleased at what the Bush administration did or didn't do but I can say that I am one of the 48 % of the American people who did not vote for Obama.
Posted by myopinion4once at 9:35 PM : Mar 15, 2009
***************************************************
Two years from now everyone will be looking for the 15% that voted for Obama including some his staunch supporters..There was rumor last week that Pelosi was proposing another stimulus bill..This ******* will not be happy until she decimates the whole country as she did California..

[GTJeff76]

Why are these bonuses even administered through contracts?

Getting a bonus should be about doing a good job for past work. They should always be discretionary based on performance and profitability of the company in absence of accepting government help.

If people do ****-poor work and lose money, they obviously shouldn't get bonuses.

[roanoke62]

When is everyone going to finally realize that the rich are the only one that are going to survive this crap we are in and the people worried about putting food on their table will receive or have anything to say about it. The line between the rich and poor go to close for comfort so the rich had to do something to push the poor and middle class back down the ladder. God help if any small people where to ever become comfortable in life and have the taste of the good life and actually could see above water. My opinion is they should fire the ones that went ahead and got the bonuses. WHAT ARE THEY THINKING!!!!! We all need help, and some a whole lot more than someone getting bonuses in 6 digit numbers.....These people themselves should have at least bowed their head and said I do not deserve this money, I helped do a poor job and put us in the position we are in. But, we know what they think, "the little people did this, NOT us" Good night and I hope they have fun with there money, because we all have to pay in the end!
God bless all the people struggling and trying to feed their families, look for work, and just keep a roof over there head. I will pray, but for those that really need it.. Well, that leaves out AIG, Banks, etc!!!!! good nite to all the real people!