President Obama has asked Treasury Secretary Timothy Geithner to stop American International Group Inc. from paying $165 million in retention bonuses to financial products unit employees.
AIG, New York, says it is “contractually obligated” to pay the previously negotiated bonuses, which were due Sunday, to AIG Financial Products Corp. unit employees. AIG Financial Products sold many of the arrangements, such as credit default swaps, that led AIG to seek federal financial assistance in September 2008.
AIG “is a corporation that finds itself in financial distress due to recklessness and greed,” Obama said in remarks at the White House. “Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay.”
Geithner should use every legal means to try to block the bonus payments, Obama said.
“All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses,” Obama said. “And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules.”
Another official, New York Attorney General Andrew Cuomo, D, has asked AIG to show him the contracts “you now claim obligate you to make those payments.”
Cuomo wants to know who negotiated the contracts and who developed the retention bonus plan, “so we can begin to investigate the circumstances surrounding these questionable bonus arrangements.”
Cuomo also wants information concerning whether the payments “may be considered fraudulent conveyances under New York law,” Cuomo writes in a letter to Liddy.
Cuomo asks in the letter that the information be submitted by 4 p.m. today. If AIG were to miss the deadline, Cuomo would “issue subpoenas and seek, if necessary, to enforce compliance in court,” Cuomo writes. “We owe it to the taxpayers to take every possible action to stop unwarranted bonus payments to those who caused the AIG meltdown in the first place.”
After the original version of this article appeared, Cuomo said at a press conference that he had not received the information and had started the process of issuing subpoenas.
“We are in contact with the attorney general and will of course respond to his request,” an AIG spokesman said earlier in the day.
Earlier, an aide to Rep. Elijah Cummings, D-Md., said Cummings is planning to send a letter to Geithner expressing outrage over the bonus payments.
AIG Chairman Edward Liddy defended the bonuses payments in a letter sent to Treasury Secretary Timothy Geithner.
AIG executives do not like the bonus arrangements “and find it distasteful and difficult to recommend to you that we must proceed with them,” Liddy writes.