- AIG - Bonuses - Economic crisis
Outrage as bailed-out AIG pays 100 million dollars in bonuses
AIG, who were bailed-out by the US government at the height of the financial crisis, is set to pay out approximately 100 million dollars in bonuses, sparking outrage among US officials.
AFP- AIG was set to begin paying 100 million dollars in bonuses Wednesday, prompting fresh outrage a year after similar payments by the bailed-out insurance giant ignited a political firestorm.
The government's pay czar in charge of compensation at bailed-out companies, Kenneth Feinberg, said the payments were part of legally binding contracts that must be paid despite the outrageous nature of the bonuses.
"These are old grandfather contracts that have the legal force of law," Feinberg told the ABC television program Good Morning America.
He said that the government was working to recoup part of the payments under agreements reached with AIG employees.
"We are making some progress," he said. "I do not for a minute ignore the outrage out there which I share. But the fact of the matter is we've got to abide by the law, we've got to work as best we can to get as much of this money back as we can and frankly we are doing a very very good job I think in getting as much of this money as we can pursuant to the rule of law."
The payments, confirmed by a source close to the matter, were part of a deal in which employees agreed to accept less than they were owed in exchange for early payouts, in an effort to stem the outrage that occured last year.
US officials have argued that the government was unable to stop the legally binding payments to the employees at the troubled Financial Products division that nearly sank AIG after a meltdown in the US housing market.
Nonetheless, news of the latest bonuses triggered fresh criticism of the administration in view of the massive bailout of AIG worth more than 180 billion dollars.
Republican Senator Charles Grassley said of the latest bonuses, "AIG has taxpayers over a barrel. The Obama administration has been outmaneuvered."
American International Group, rescued in the face of a threatened financial system meltdown in September 2008, said in a statement that around 97 percent of employees with its troubled Financial Products division "have volunteered to reduce their upcoming 2010 payment."
The moves will help achieve the company's "giveback target" of reduced bonus payments in an effort to stem the type of blistering criticism that erupted a year ago.
The company owes about 198 million dollars in bonus payments, according to government officials.
"We have decided to begin these reduced payments to these active employees as well as those nonactive employees who agreed to reductions," AIG said. "The reductions from these two groups stand at about 20 million, and we believe this allows us to largely put this matter behind us."
About 200 active and former employees will receive the early payments, which were available only to those who agreed to a cut.
The company said that some former employees volunteered to reduce payments by an additional 4.5 million dollars.
US officials say only about 19 million dollars has been returned from 2009 payments to AIG employees despite pledges to return 45 million dollars.
AIG promised to work with those employees "to round out the remaining amount of our giveback target over the next few months."
The payments stem from employment contracts signed in 2007 that fall outside the jurisdiction of Feinberg, who oversees compensation at companies receiving bailout money from the Troubled Asset Relief Program (TARP).