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Chorus of outrage over millions in AIG bonuses

(Agencies)
Updated: 2009-03-16 09:16

WASHINGTON -- Leaders of the White House economic team and the Senate's top Republican bellowed about bonuses at a bailed-out insurance giant and pledged to prevent such payments in the future.

From one Sunday talk show to the next, they tore into the contracts that American International Group asserted had to be honored, to the tune of about $165 million and payable to executives by Sunday -- part of a larger total payout reportedly valued at $450 million. The company has benefited from more than $170 billion in a federal rescue.

AIG plans to pay 450 million dollars in bonuses to finance executives who led the insurance giant to a 99.3-billion dollar loss last year. [Agencies]

AIG has agreed to Obama administration requests to restrain future payments. Treasury Secretary Timothy Geithner pressed the president's case with AIG's chairman, Edward Liddy, last week.

"He stepped in and berated them, got them to reduce the bonuses following every legal means he has to do this," said Austan Goolsbee, staff director of President Barack Obama's Economic Recovery Advisory Board.

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"I don't know why they would follow a policy that's really not sensible, is obviously going to ignite the ire of millions of people, and we've done exactly what we can do to prevent this kind of thing from happening again," Goolsbee said.

Added Lawrence Summers, Obama's top economic adviser: "The easy thing would be to just say ... off with their heads, violate the contracts. But you have to think about the consequences of breaking contracts for the overall system of law, for the overall financial system."

Summers said Geithner used all his power, "both legal and moral, to reduce the level of these bonus payments."

The Democratic administration's argument about the sanctity of contracts was more than Senate Republican leader Mitch McConnell of Kentucky could bear.

"For them to simply sit there and blame it on the previous administration or claim contract -- we all know that contracts are valid in this country, but they need to be looked at," McConnell said. "Did they enter into these contracts knowing full well that, as a practical matter, the taxpayers of the United States were going to be reimbursing their employees? Particularly employees who got them into this mess in the first place? I think it's an outrage."

In an interview that aired Sunday on CBS' "60 Minutes," Federal Reserve Chairman Ben Bernanke did not address the bonuses but expressed his frustration with the AIG intervention.

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