AIG may have to rescind bonus payments

AIG chairman and chief executive officer Edward Liddy has asked employees to return at least half of the bonuses paid to them after facing sharp criticism from taxpayers and federal officials.

"I have asked the employees of AIG Financial Products to step up and do the right thing. Specifically, I have asked those who received retention payments of $100,000 or more to return at least half of those payments," Liddy said in his testimony to a sub-committee of the US House of Representatives.

"We have heard the American people loudly and clearly these past few days," Liddy said adding that some of employees had already stepped forward and offered to give up 100 per cent of their payments.

The furore over the $165 million in bonuses by bailed-out insurance company American International Group Inc is getting louder, with President Obama himself saying he was ''stunned'' by the size of the payments, and vowing to get the money back for taxpayers.(See: Failed AIG's bonuses to employees draw flak)

The hapless Liddy, who took the charge of the company in September when the government had injected the first package of $85 billion to bail out AIG and inherited the mess, has not taken any bonus himself and works on a token salary of $1 per year.

Yesterday, the US House of Representatives voted overwhelmingly to impose a 90-per cent tax on employee bonuses at AIG and other companies that get $5 billion or more in taxpayer bailout funds. The margin was 328-93 in favour of the proposal.

States up in arms
The New York-based AIG sparked outrage because the bonus payments are widely perceived to come out of the $173 billion in bailout funds that the company received. As many as 19 states have started their own investigations into the bonuses paid by AIG.

New Jersey attorney general Anne Milgram said she had sent a letter to Liddy demanding a list of employees in the AIG Financial Products unit who received bonuses since September and whether they were paid with federal money, while New York attorney general Andrew Cuomo said yesterday that insurer had already sent him such a list in response to a subpoena.

Cuomo also said that he expected to receive information on $3.6 billion in bonuses paid to Merrill Lynch & Co employees in December. Bank of America Corp, which bought Merrill on 1 January, lost its court bid to prevent Cuomo from disclosing the recipients' identities to the public.

Milgram was joined in the request by Arizona, Delaware, Illinois, Kentucky, Louisiana, Maine, Michigan, Mississippi, Montana, Nebraska, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Washington and West Virginia. Connecticut has subpoenaed AIG separately.

Taxpayers furious
Anger and revulsion spread across the US at the idea that AIG was using taxpayers' money to lavish million-dollar bonuses on 72 executives, many of whom are blamed for crashing the company and sending the world economy into a tailspin.

Chief executive officer Liddy has said his hands were tied and the company is bound by contracts to fulfill the bonus commitments, but lawmakers have said they will find ways to get back the money, including levying 100-per cent tax on the bonus recipients.

The scandal also threatens to singe the Obama administration, which was initially slow to call AIG to book and took a soft line on the excess before being galvanised into action amid public outrage.

The agony over AIG's payments greed comes on the heels of several such excesses that average Americans have had to endure at a time of economic distress, from auto executives arriving in Washington DC in separate corporate jets to beg for bailouts, to Citibank ordering a $5- million executive jet for its top bosses, to stories about the vast riches of the jailed 'Ponzi king' Bernie Madoff.

However, many experts feel the public anger is misdirected, and people should be questioning the original $173-billion bailout rather than the bonus payments, which were obligatory under contracts signed with employees.

Obama defends Geithner
Talking to Jay Leno on the 'Tonight Show' yesterday, President Obama said that while it was necessary to rescue the troubled insurance giant, ''the question is, who in their right mind, when your company is going bust, decides we're going to be paying a whole bunch of bonuses to people''.

He again expressed confidence in treasury secretary Timothy Geithner, who has come under fire from some lawmakers in Congress for not blocking AIG from paying the bonuses. Geithner, Obama said, is doing his job ''with grace and good humor and he understands that he's on the hot seat. But I actually think that he's taking the right steps and we're going to have the economy back on the move.''

The president said, even with the economy in a recession and the financial system in a crisis, Americans ''should have complete confidence in their banks.''