A new furor erupted on Wednesday as American Insurance Group (AIG) revealed plans to pay US$100 million in bonuses a year after similar payments by the bailed-out insurance giant ignited a political firestorm.
US President Barack Obama was “frustrated and angry” about the hefty payouts, a spokesman said, while the government’s pay czar in charge of compensation at bailed-out companies called the payments an “outrage” that were nonetheless legally binding.
AIG said it would make the payouts under a deal in which employees agreed to accept less than they were owed in exchange for early payment.
Asked about the new bonuses, White House deputy press secretary Bill Burton said: “Obviously, the president is frustrated and angry that Wall Street continues to have the sense that excessive compensation should reward some of the excessive risk taking we’ve seen over ... the last couple years on Wall Street, things that brought us to the brink.”
Kenneth Feinberg, the pay czar designated under the Troubled Asset Relief Program (TARP), said the payments were part of legally binding contracts that must be paid despite the outrageous nature of the bonuses.
“These are old grandfather contracts that have the legal force of law,” Feinberg said in an ABC television interview.
He said the government was working to recoup part of the payments under agreements reached with AIG employees.
“We are making some progress,” he said. “I do not for a minute ignore the outrage out there which I share. But the fact of the matter is we’ve got to abide by the law, we’ve got to work as best we can to get as much of this money back as we can and frankly we are doing a very, very good job, I think, in getting as much of this money as we can pursuant to the rule of law.”
US officials have argued that the government was unable to stop the legally binding payments to the employees at the troubled Financial Products division that nearly sank AIG after a meltdown in the US housing market.
Nonetheless, news of the latest bonuses triggered fresh anger, including criticism of the Obama administration.
Republican Senator Charles Grassley said of the latest bonuses: “AIG has taxpayers over a barrel. The Obama administration has been outmaneuvered.”
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