President Obama Objects to AIG Bonus Payout
AIG, American Internal Group, announced recently that it is legally bound to payout $165 million in employee bonuses as a part of a larger payout of coming to a total of $450 million.
This is after they have used government bailout funds that they have recently received to indemnify banks and financial institutions to the tune of $90 billion. Among the larger recipients of many from AIG money are Goldman Sachs which received $12.9 billion, and the three European banks - Germany's Deutsche Bank receiving $11.8 billion, France's Societe Generale which received $11.9 billion, and Britain's Barclays PLC to which AIG paid out $8.5 billion. On December 31st of last year, Merrill Lynch, another financial firm that has received government aid and is therefore under scrutiny as regards its bonus plans, received $6.8 billion.
The money was given to banks so as to cover losses involved in complex mortgage investments, as well as to serve as collateral needed for other transactions.
Republican U.S. senator Richard Shelby argues that exploration should be made into everything possible in order to make sure that the money is not wasted. He says that they are responsible for their own actions and failure should not be rewarded. He notes that many should not be awarded but fired.
AIG has agreed to requests by the Obama administration to hold down future payments. Treasury Secretary Timothy Geithner had put forth the president's case last week with Edward Liddy, AIG's chairman.
Obama's Economic Recovery Advisory Board staff director Austan Goolsbee says that using every means available to him, he berated them, getting them to reduce the bonuses.
Speaking in an interview airing Sunday on CBS, Ben Bernanke, Chairman of the Federal Reserve, while expressing his frustration with the AIG intervention, failed to address the bonuses.
Bernanke who expressed anger himself when speaking of the AIG affair, said he could understand why the American people are angry.
Liddy said in a letter to Geithner dated Saturday, that lawyers had already informed the company that it had entered into contractual obligations to payout the bonuses and might face lawsuits if it did not do so.
The comments made by President Obama regarding AIG occurred as he and Geithner were announcing a small business loan program along with a series of temporary tax incentives. Included in the small business package is $730 million from the stimulus plan, as well as the reduction of small-business lending fees and an increase to 90 % of the guarantee on some Small Business Administration (SBA) loans.
While directing more than $10 billion aimed at unfreezing the secondary credit market, major actions are also being planned by the government to boost bank liquidity. This is a key move to making it easier for small businesses to borrow.
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