President Barack Obama sent the strongest warning yet that AIG had better back off their plan to award $165 million in bonuses, as he announced that Treasury Secretary Tim Gueither is exploring every legal option to block these bonuses.
Obama asked how a company that was bailed out by the taxpayers can believe that their executives deserve bonuses. The President said, “This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?”
Obama continued, “In the last six months, AIG has received substantial sums from the US Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole. I know he’s working to resolve this matter with the new CEO, Edward Liddy, who came on board after the contracts that led to these bonuses were agreed to last year.”
Since the AIG money is not in the TARP, but it technically isn’t taxpayer money. The bigger problem might be that AIG can’t pay back the government. AIG put out a statement last night which said that they didn’t have the money. They used much of the federal funds to pay banks that they were in debt to. The government is an 80% stakeholder in AIG, which means that they should have the ability to challenge and block these executive bonuses. As I stated last night, if AIG was smart, keeping in mind that people who are trying to claim bonuses also ran the company into the ground, they would announce that they are going to not pay the bonuses.
If I took over a company like AIG, those executives would not have to worry about bonuses, because they would be fired. Without the generosity of the tax payers, AIG would not be in business, and for the life of me, I can’t understand why anyone at AIG would have thought that paying these bonuses was a good idea. Now that the White House has weighed in, the campaign of shame is in full swing.