AIG bonus payments controversy
[3] The event sparked widespread outrage among both Democratic and Republican politicians, and from media commentators on all sides of the political spectrum.
[4] Following this announcement, House Majority leader Steny Hoyer concluded that the scandal did not warrant a legislative response.
[5] AIG had insured the toxic financial assets that caused the subprime mortgage crisis without making rigorous risk assessments.
[6] The Federal Reserve Bank of New York bailed out AIG by providing an emergency credit liquidity facility of up to $85 billion,[7] which will be repaid by selling off assets of the company.
The Federal Reserve required a 79.9 percent equity stake as a fee for service and to compensate for the risk of the loan to AIG.
[6] On the wake of the scandal, President Barack Obama said, "[I]t's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay.
I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole.
"[12] Senator Chuck Schumer (Democrat, New York) accused AIG of "Alice in Wonderland business practices" and said "It boggles the mind."
"[2] Representative Mark Kirk (Republican, Illinois) said "AIG should not be on welfare from Uncle Sam, and yet paying bonuses and transferring a considerable amount of taxpayer funds to entities overseas.
"[13] Austan Goolsbee, of the Council of Economic Advisers said "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."
"[17] Representative Barney Frank said "I do want to stress, this initial intervention into AIG was not part of the congressional rescue plan.
Numerous court rulings have upheld retroactive tax provisions, particularly over short periods (The House bill applies back only to January 1, 2009).
[25] A March 26, 2009 Associated Press article stated, "Obama then warned the public against vilifying investors and entrepreneurs who are needed to keep the economy alive.
The following year, Obama raised the idea of taxing TARP bonuses while campaigning for the 2010 United States elections.
[27] Congressman Brad Sherman introduced a bill to restrict base salaries of employees of firms who have taken $5 billion or more in the Troubled Asset Relief Program by taxing all non-bonus compensation over $500,000.
"[34] CNN reporter Carol Costello said "Some political analysts fear public anger has reached a tipping point.
This supposed paragon of higher finance was just plain playing Russian roulette with his shareholders' money, destroying nearly $200 billion in equity and putting an onerous cost on Uncle Sam and taxpayers."
"[41] The Washington Post reported that "Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year.
[43] AIG has advised employees "to avoid wearing the company logo" and "to travel in pairs at night and park in well-lit areas.
Some of the people who made the threats left their email addresses and phone numbers, making it much easier for law enforcement officials to identify them.
"[47] Mike Cassidy of the San Jose Mercury News wrote that the bonuses bring "a whole new meaning to the phrase 'bank robber.'"
[52] On February 14, 2009, the Wall Street Journal published an article, Bankers Face Strict New Pay Cap,[53] discussing a retroactive limit to bonus compensation inserted by Chris Dodd into the TARP bill that passed in the Senate.
The same article went on to mention that Treasury Secretary Timothy Geithner and Lawrence Summers "had called Sen. Dodd and asked him to reconsider".
On March 17, 2009, Fox Business Network's Rich Edson first reported Senator Chris Dodd included a provision exempting such bonuses from the executive pay limits clause of the TARP.
[54][55][56] When the bill left conference, Dodd's provision had been removed and replaced with the explicit exemptions lobbied for by Geithner and Summers.
[65] MSNBC host David Shuster said "The argument that these were so-called retention bonuses is undermined by the fact that 52 of the people who received them have already left the company.
[67] Evan Newmark of The Wall Street Journal accused those attacking AIG of "hysterical, bloodthirsty ravings" and "populist hurly-burly.
"[72] AIG CEO Edward M. Liddy told Congress that he asked employees who received bonuses over $100,000 to give half back.
employees had nothing to do with the money-losing credit default swaps, that many of them had lost much of their savings in the form of deferred compensation invested in the capital of AIG-F.P., that he and others had agreed to work for an annual salary of $1 out of a sense of duty to the company, that AIG-F.P.
employees were assured many times following the government bailout in September 2008 that AIG would honor the pre-existing retention contracts with scheduled payments to be made in March 2009, and that AIG-F.P.
