Geithner: AIG Must Pay Back Bonus Money
4861593In a letter to House Speaker Nancy Pelosi, Treasury Secretary Timothy Geithner said insurance giant AIG will have to reimburse the Treasury the $165 million it has recently paid out in bonuses to executives.
"We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid," he wrote. (Fox News has a PDF of the entire letter here.)
In addition, Geithner wrote, the Treasury will deduct another $165 million from the most recent $30 billion in bailout money being given to the company – which means that the company will be paying back to the government double what it paid out in bonuses.
It's worth noting that the U.S. government now owns 80 percent of AIG, so to some extent this request mandates that the government pay back…the government. In addition, the $330 million requested by Geithner is a proverbial drop in the bucket when seen in the context of the $170 billion-plus the government has given the company.
In the letter to Pelosi, Geithner stated that he was first informed of the bonuses last week, echoing the timeline released by the White House. At the time, he wrote, he registered his "strong objections" to AIG CEO Edward Liddy. Following a contentious press conference Tuesday, the White House has indicated that Geithner learned about the situation last Tuesday and informed President Obama's aides Thursday. The plan to pay the bonuses, however, was first publicized last fall.
Geithner wrote that Liddy indicated then that the bonuses had to be paid out by virtue of contractual obligations, and that Treasury lawyers agreed "that it would be legally difficult" to prevent the payments. He wrote that Liddy committed to "scrap or cut hundreds of millions of dollars in additional payments due this year and beyond" in accordance with the executive compensation guidelines in the stimulus package.
Liddy is testifying before Congress today. Geithner wrote that despite the "considerable outrage" over the situation, the "public ire" directed at the AIG CEO, who was put in place at the request of the government last year, is "unjustified."
"He inherited a difficult situation, including these AIGFP retention contracts, which were entered prior to his or the government's involvement in AIG," the Treasury secretary wrote.