AIG pays bonuses despite bailout
American International Group is giving its executives tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than US$170bn (€131.5bn).
AIG is paying out the executive bonuses to meet a deadline, but the troubled insurance giant has agreed to administration requests to restrain future payments.
The US Treasury Department determined that the government did not have the legal authority to block the current payments by the company.
AIG declared earlier this month that it had suffered a loss of US$61.7bn (€47.7bn) for the fourth quarter of last year, the largest corporate loss in history.
Treasury Secretary Timothy Geithner asked that the company scale back future bonus payments where legally possible, an administration official said.
The official said that Mr Geithner had called AIG chairman Edward Liddy on Wednesday to demand that Mr Liddy renegotiate AIG’s current bonus structure.
Mr Geithner termed the current bonus structure unacceptable in view of the billions of dollars of taxpayer support the company is receiving.
In a letter to Mr Geithner, Mr Liddy informed the Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.
Mr Liddy said in his letter that “quite frankly, AIG’s hands are tied” although he said that in light of the company’s current situation he found it “distasteful and difficult” to recommend going forward with the payments.
