- AIG - banking - Bonuses - financial crisis - USA
AIG made the startling announcement on Tuesday that 15 out of 20 of its bonus recipients would be returning their bonuses - a reimbursement of 50 million US dollars out of a total 165 million. The scandal has become the proverbial last straw in the growing public resentment about executive bonuses in a time of economic crisis. AIG is the recent recipient of 150 billion dollars in government aid.
According to some analysts, it may not be a coincidence that this news came at around the same time that US Treasury secretary Timothy Geithner announced his trillion dollar Public and Private Investment Programme. FRANCE 24’s Business Editor Douglas Herbert said, “While I would be the last to defend the warped Wall Street Bonus culture, the backlash against bonuses we’re seeing is driven more by politics than by economics. Obama desperately needs the good will of Wall Street and Congress to ensure the success of his financial rescue plan.”
Geithner’s plan is aimed at improving the financial health of banks by allowing the government – in partnership with private investors – to buy up toxic assets, thereby allowing the banks to start with a clean slate.
Harold Hau, a professor of finance at the INSEAD business school in Fontainebleau, told FRANCE 24 why Geithner was so hasty in announcing the plan: “Obama lost credibility by not acting swiftly enough in this crisis,” adding that this was “the Hurricane Katrina of the Obama administration.”
Radical measures such as the trillion dollar package – which would be partly shouldered by private companies – may reflect increasing public mistrust toward what it perceives as the government’s cosseting of big corporations.
So universal was the public outcry against AIG, for example, that it crossed bipartisan lines. When the House of Representatives voted on March 19 to reclaim 90 percent of the bonuses by levying a special tax, the bill passed by a staggering 382 for, 93 against.
This week, the US Senate is reviewing a measure to institute similar policies across the board. According to a March 19 Senate press release, Senator Chuck Grassley, one of the authors of the bill, said, "Getting bailed out by the American taxpayer was more than enough of a bonus for these companies and individuals.”