WASHINGTON BUREAU — The Obama administration believes it now has a handle on executive bonuses at American International Group Inc. (NYSE:AIG, Treasury Secretary Timothy Geithner said today.
If Congress enacts a proposal to raise revenue from large banks, that would go a long way toward ensuring that the cost of the bonus payments is recouped, Geithner said.
Geithner was reacting to news that AIG, New York, has persuaded employees to accept a $20 million cut in bonus payments but still will distribute $100 million in bonuses.
"These payments are tied to employment contracts from 2007 that fell outside the jurisdiction of the special master [for Troubled Asset Relief Program executive compensation] and the law," Geithner says in a statement.
"We are encouraged that AIG employees are making good on the repayment pledges they made last spring," Geithner says.
Geithner also talked about AIG bonuses while testifying on behalf of the Obama administration's budget for fiscal year 2011 at a hearing organized by the House Ways and Means Committee.
Geithner used the hearing as an opportunity to promote the administration's financial services reform proposals, including a proposal for a fee that would be imposed on large banks.
The proposed fee would affect insurance companies, banks and securities firms with assets of more than $50 billion and a component with some sort of federal regulator. The administration included the proposal Monday, when it released a 10-year budget outline proposal, and estimated the fee would yield about $9 billion in revenue each year.
"If you join with us in passing this proposed fee on our largest financial institutions, you'll be able to say as we do, that the American taxpayer will not pay a penny" to reward executives at AIG and others who had a role in the financial crisis," Geithner testified.
Geithner also testified on behalf of the budget Tuesday before the Senate Finance Committee.
Sen. Charles Grassley, R-Iowa, said the U.S. Treasury Department has not done enough to provide him with data on the bonus issue.
Grassley said that he was briefed last week by Kenneth Feinberg, the special master on TARP executive compensation, but that he has still not received documents he requested in December 2009.
"In December, I asked you for details regarding the $168 million in AIG retention bonus payments paid in 2009 and the $198 million in AIG retention bonuses planned for March of this year," Grassley said. "Some of the AIG executives promised to return $45 million of the '09 bonuses, but that didn't happen. Nevertheless, AIG still planned to pay $198 million bonuses this year."
AIG "has taxpayers over a barrel," Grassley said. "The Obama administration has been outmaneuvered. And the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand."
Geithner told Grassley he will get Grassley the bonus information as quickly as possible.
"I just want to emphasize that Ken Feinberg, who I appointed to try and make sure we are fixing in compensation structure for this set of institutions, is working very hard on just the concern you raised, and I'm sure he'll be able to provide a little more detail in public and in writing when he's reached those judgments," Geithner said.
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