Reid: Congress intends to retrieve some AIG money
March 17, 2009
WASHINGTON ” Senate Democratic Leader Harry Reid said Tuesday Congress will force executives of American International Group to pay back at least some of the $165 million in bonuses they received after the insurance giant got billions in federal bailout money.
It’s unclear how that would be done, but Senate Finance Committee Chairman Max Baucus suggested imposing an excise tax on the AIG bonuses. “What is the highest excise tax we can impose that will stand up in court?” Baucus asked. “Let’s find out what it is.”
The latest jockeying came amid mounting criticism of the bonuses and after the Obama administration said it wanted to put strict limits on how future government bailout dollars can be used. That didn’t stop sharp questions about what the administration knew about the bonuses ” and when.
Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, chastised the administration earlier Tuesday, saying Treasury Secretary Timothy Geithner should have blocked the payouts. Shelby charged that Geithner either knew or should have known about the bonuses.
“We need to know, what are the details of this? When were the bonuses signed up? Who’s getting it?” Shelby said.
The Alabama senator stopped short of calling for Geithner’s resignation, but said, “He’s under fire from all sides now.”
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“I don’t know if he should resign over this,” Shelby said. “He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this.”
AIG was predictably raked over the coals at a banking committee hearing on regulating the insurance industry.
“One way or another, we’re going to try to figure out how to get these resources back,” said Christopher Dodd, D-Conn., the panel’s chairman.
“This is ridiculous,” exclaimed Sen. Jon Tester, D-Mont. He said AIG executives “need to understand that the only reason they even have a job is because of the taxpayers.”
Sen. Sam Brownback, R-Kan., said that any AIG executive who received a bonus should return it or be fired.
“I am outraged at the news that AIG, a company that has taken so much taxpayer money in the form of bailouts, is now paying out hundreds of millions of dollars in executive bonuses,” Brownback said. “I will do everything I can to see that AIG returns its bonus money to taxpayers.”
Edward Liddy, the CEO of American International Group Inc., is scheduled to testify Thursday before a House subcommittee.
AIG is not alone in the controversy, however.
Earlier this month, Sen. Robert Menendez, D-N.J., a member of the Senate banking committee, sent a letter to Geithner urging him to investigate bonuses reportedly planned by Morgan Stanley and Citigroup’s Smith Barney as well as deferred guaranteed bonuses being considered by Bank of America.
Morgan Stanley’s joint brokerage venture with Citigroup was reportedly planning to pay its brokers up to $3 billion in retention bonuses to keep them from jumping to other firms. Wells Fargo & Co., however, decided not to make such retention payments to Wachovia Corp.’s brokers. Wells Fargo acquired Wachovia in December.
“Awarding excessive bonuses to executives who have driven their companies to the brink of collapse would seem to be fundamentally backwards,” Menendez wrote. “Using taxpayer funds to make these payments would be offensive and illegal.”
The financial bailout program remains politically unpopular and has been a drag on Obama’s new presidency, even though the plan began under his predecessor, President George W. Bush. The White House is aware of the nation’s bailout fatigue; hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while many others who have done no wrong have paid the price.
President Barack Obama has lambasted the insurance giant for “recklessness and greed” and pledged to try to block payment of the bonuses. Obama said he had directed Geithner to determine whether there was any way to retrieve or stop the bonus money ” a move designed as much for public relations as for public policy.
New York Attorney General Andrew Cuomo said he has issued subpoenas for the names of AIG employees given bonuses despite their possible roles in its near-collapse. Cuomo said his office will investigate whether the bonus payments are fraudulent under state law because they were promised when the company knew it wouldn’t have the money to cover them. AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history, and it has benefited from more than $170 billion in a federal rescue.
Associated Press Writers Jim Kuhnhenn and Deb Riechmann contributed to this story.