US Treasury secretary Timothy Geithner told congressional leaders the US will recoup executive bonuses paid by American International Group as outraged lawmakers rushed to take back such payments from all companies getting federal bailouts.
Mr Geithner, who has come under fire from Republicans for not doing enough to stop the AIG payments, said in a letter to lawmakers last night the government will recover the money by requiring it be repaid from company operations and deducting the amount from the next $30 billion in aid being provided to the insurer. He also said the government will work to accelerate the “wind down” process of restructuring AIG.
The senior members of the Senate Finance Committee from both parties proposed taxes totalling 70 per cent on bonuses at AIG and other companies getting federal money during the US financial meltdown.
House Speaker Nancy Pelosi directed committees there to draft several alternatives and said her chamber may consider a bill as early as this week.
“Millions lost their jobs; it’s an outrage that the people who somewhat caused this problem are now paying themselves bonuses,” Senate Finance chairman Max Baucus, a Montana Democrat, said yesterday in Washington.
He and ranking Republican Chuck Grassley of Iowa also proposed limiting some forms of deferred compensation to $1 million at companies getting bailout funds.
New York-based AIG paid $165 million in executive bonuses after taking taxpayer-funded bailouts totalling $173 billion. AIG also budgeted $57 million in “retention” pay for employees who will be dismissed, according to a March 2nd filing to the Securities and Exchange Commission.
Mr Geithner’s letter said Treasury lawyers determined that it would be “legally difficult” to prevent AIG from paying the bonuses because they were required by contracts.
“We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of retention rewards just paid,” Mr Geithner wrote. “In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments.”
Two Republican congressional leaders, Senator Mitch McConnell of Kentucky and Representative John Boehner of Ohio, have said Geithner bears some blame for the AIG bonuses.
Boehner, the House minority leader, and McConnell, the Senate minority leader, both said yesterday that Mr Geithner should have gotten assurances from the company that it wouldn’t be paying bonuses before AIG received additional government funds in early March.
“Wouldn’t the Treasury and the taxpayer have had more leverage over AIG’s executive contracts before providing another $30 billion in taxpayer money?” McConnell said in a statement.
Bloomberg