President Obama says he has asked Treasury Secretary Timothy Geithner to “pursue every single legal avenue” to block the payment of $165 million in executive bonuses at American International Group.
“This is a corporation that finds itself in financial distress due to recklessness and greed,” the president said to small-business representatives gathered in Washington on Monday, March 16.
“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” the president said of planned compensation for employees at AIG Financial Products. That unit’s credit-default swap business contributed significantly to AIG’s plight.
“How do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama said.
Noting that AIG “has received substantial sums” from the U.S. Treasury as part of rescue efforts during the past six months, the president said he has asked Geithner to “use that leverage and pursue every single legal avenue to block those bonuses and make American taxpayers whole.”
As the crowd applauded, he added that the Treasury secretary is “working to resolve the matter” with AIG chief executive Edward Liddy, who the president noted “came on board after the contracts that led to these bonuses were agreed to last year.”
“What this situation also underscores is the need for overall financial regulatory reform, so we don’t find ourselves in this position again, and for some form of resolution mechanisms in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial systems in cases such as this,” Obama said.
He said the government does not have all of the regulatory authority it needs to deal with situations like AIG.
Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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