No question it appears these people through what Obama said Monday was "recklessness and greed" destroyed the giant insurance company and contributed immensely to the meltdown of the financial sector of the economy.
The feds have funneled $170 billion into AIG and taken 80% control to keep it afloat.
Lawyers for AIG have informed Congressional oversight committees that the bonuses are part of a contractual agreement and must be paid.
That strikes at the heart of the issue, not the grandstanding by politicians. It is exactly what is being asked.
New York Attorney General Andrew Cuomo sent a letter Monday to AIG's chairman Edward Liddy requesting a full accounting for the bonuses, CNBC reported. According to CNBC, the letter requests a list of those who received the bonuses, what their roles are and why they deserve a bonus. Cuomo wants the list by 4 p.m., CNBC said, or he will subpoena AIG.
It doesn't take a Harvard grad to guess the nature of these contracts. They presumably are based on commissions and revenues generated by derivative trading under the guise of deceptive AAA rating protections by the securities rating agencies. The question then becomes was complicity or criminal intent involved in these transactions. If not, the money was gained for a very few at the expense of millions of others losing jobs and life savings. It is why congressmen such as Barney Frank calls the bonuses a process of "rewarding incompetence."
In no way am I defending the conduct of these people. I can't help but wonder if the highest powers in AIG agreed to the contracts with greed in mind followed by a wink and a nod.
But, the populist show must go on. From http://www.msnbc.msn.com/id/29714402/:
"These people may have a right to their bonuses. They don't have a right to their jobs forever," said Frank, echoing outrage expressed on both sides of the political aisle...
Because AIG's (initial) bailout money came direct from the Federal Reserve it is not "technically taxpayer money" and Congress may have limited recourse against the company for handing out large bonuses. NBC White House correspondent Chuck Todd reports.
The money was payable to executives by Sunday and was part of a larger total payout reportedly valued at $450 million. AIG has argued that it was contractually obligated to pay the bonuses.
Appearing on NBC's "Today" show, Frank noted that the Federal Reserve Board, using a Depression-era statute, was the institution that gave AIG its initial government bailout, before Congress passed legislation providing for additional assistance. He said he did not think sufficient safeguards were built into that initial bailout by the Fed.
Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, added on NBC's "Today" show that "it does appear to be that we're rewarding incompetence."
On ABC's "Good Morning America" Monday, Sen. Richard Shelby said Congress must do everything it can to make sure the government money going to AIG is handled appropriately. The Alabama Republican, who is the ranking member of his party on the Banking Committee, also said he was angry.
"We ought to explore everything that we can through the government to make sure that this money is not wasted," Shelby said. "These people brought this on themselves. Now you're rewarding failure. A lot of these people should be fired, not awarded bonuses. This is horrible. It's outrageous."
Frank said he was disgusted, asserting that "these bonuses are going to people who screwed this thing up enormously."
Frank said Congress intends to make very clear that it will not stand for "any more abuses of this nature."
Frank's statement came as AIG revealed it used more than $90 billion in federal aid to pay out foreign and domestic banks, some of which had received their own multibillion-dollar U.S. government bailouts.
Some of the biggest recipients of the AIG money were Goldman Sachs at $12.9 billion, and three European banks — France's Societe Generale at $11.9 billion, Germany's Deutsche Bank at $11.8 billion, and Britain's Barclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans, received $6.8 billion as of Dec. 31.
"The ability of AIG to meet its obligations is important to the stability of the U.S. financial system and to getting credit flowing to households and businesses," Federal Reserve spokeswoman Michelle Smith said.
The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.
Other banks receiving between $1 billion and $3 billion from AIG's securities lending unit include Citigroup Inc., Switzerland's UBS AG and Morgan Stanley.
Municipalities in certain states, including California, Virginia and Hawaii, received a total of $12.1 billion under guaranteed investment agreements.
The company said it used billions more to fund its Maiden Lane business, which was set up following the federal bailout to purchase toxic assets, and to repay debt and provide capital for some of its operations.
"I've been asking for this information for months. This is a good first step, but I'm concerned by how long it took,' said Rep. Carolyn Maloney, who is chair of Congress' Joint Economic Committee.
In a letter to Treasury Secretary Timothy Geithner dated Saturday, Liddy said outside lawyers informed AIG that it had contractual obligations to make the payments and could face lawsuits if it did not do so.
Liddy said the company entered into the bonus agreements in early 2008 before AIG got into severe financial straits and was forced to obtain a government bailout. AIG has agreed to the Obama administration's requests to restrain future payments.
From the New York Times: http://www.nytimes.com/2009/03/16/us/politics/16assess.html?_r=1&hp
“There’s unquestionably a strong populist surge out there,” said Joel Benenson, Mr. Obama’s pollster, citing his own polls and focus groups. “It’s been brewing for close to four years. For the last two years, Americans were clearly indicating that they believe that one of the biggest obstacles to progress on America’s toughest challenges — notably health care and energy independence — was the influence of special interests and corporate interests on the agenda in Washington.”
A New York Times/CBS News Poll in February found that 83 percent of respondents said the government should cap the amount of compensation earned by executives of companies that are getting federal assistance.
Mr. Obama’s advisers argued that to at least some extent, this was a sentiment they could tap to push through his measures in Congress, including raising taxes on the wealthy. They pointed out that in his speech to Congress, Mr. Obama denounced corporations that “use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet...”
Still, aides acknowledged the risks of a backlash as Mr. Obama tries to signal that he shares American anger but pushes for more bail-out money for banks and Wall Street.
For all his political skills and his capturing of the nation’s desire for change in the 2008 election, Mr. Obama, a product of Harvard Law School who calls upscale Hyde Park in Chicago home, has shown little inclination to strike a more populist tone. The danger, aides said, is that if he were to become identified as an advocate for the banks and Wall Street, people could take out their anger on him.