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The New York Times
Obama Orders Treasury
Chief
to Try to Block A.I.G.
Bonuses
By HELENE COOPER,
nytimes.com from the Web, March 16, 2009
WASHINGTON — President Obama
vowed to try to stop the faltering insurance giant American International Group
from paying out hundreds of millions of dollars in bonuses to executives, as the
administration scrambled to avert a populist backlash against banks and Wall
Street that could complicate Mr. Obama’s economic recovery agenda.
“In the last six months, A.I.G. has received substantial sums from the U.S.
Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary
Timothy F. Geithner “to use that leverage and pursue every single legal avenue
to block these bonuses and make the American taxpayers whole.”
In strongly-worded remarks delivered in the White House East Room before small
business owners, Mr. Obama called A.I.G. “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
A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” Mr.
Obama said. “How do they justify this outrage to the taxpayers who are
keeping the company afloat?”
White House officials said that the administration is not looking to take A.I.G.
to court to stop the company from paying out the bonuses. But they said
the Treasury Department would be trying to figure out what they can do to block
A.I.G. from making the payments within the legal confines of A.I.G.’s
contractual obligations to the executives.
“All across the country, there are people who work hard and meet their
responsibilities every day, without the benefit of government bailouts or
multimillion-dollar bonuses,” said Mr. Obama, who called the issue one of
“fundamental values.”
“All they ask is that everyone, from Main Street to Wall Street to Washington,
play by the same rules,” he said.
The sharp presidential rebuke of A.I.G. is part of the White House effort to
distance itself from abuses that could feed potentially disruptive public anger.
Mr. Obama’s aides are worried that such anger could make it more difficult to
win Congressional approval for the additional bailout packages that Mr. Obama
has signaled may be necessary to stabilize the banking system. Already
there have been moves in Congress to limit compensation for executives at banks
and Wall Street firms that are receiving government help to survive.
A.I.G. executives say that they are contractually obligated to pay the bonuses
to their executives, including those who are part of the A.I.G. division where
the company’s crisis originated.
The government’s rescue of the insurer began last fall with the Federal
Reserve’s $85 billion emergency loan. The taxpayer assistance has now
grown to $170 billion, and the government owns nearly 80 percent of the company.
On Sunday, the company disclosed the names of dozens of financial institutions
that benefited from the bailout money injected into A.I.G. that the insurer then
paid out to satisfy financial contracts.
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