Outrage grows over AIG bonuses

Outrage grows over AIG bonuses

Laurie Kellman / Associated Press

WASHINGTON -- Talking tougher by the hour, livid Democrats confronted beleaguered insurance giant AIG with an ultimatum Tuesday: Give back $165 million in post-bailout bonuses or watch Congress tax it away with emergency legislation.

Republicans declared the Democrats were hardly blameless, accusing them of standing by while the bonus deal was cemented and suggesting that Treasury Secretary Timothy Geithner could and should have done more. While the White House expressed confidence in Geithner, it was clearly placing the responsibility for how the matter was handled on his shoulders.

Fresh details, meanwhile, pushed AIG outrage ever higher: New York Attorney General Andrew Cuomo reported that 73 separate company employees received bonus checks of $1 million or more last Friday. This at a company that was failing so spectacularly the government felt the need to prop it up with a $170 billion bailout.

Geithner sent a letter late Tuesday to congressional leaders informing them that he was working with the Justice Department to determine whether any of the AIG payments could be recovered. He cited a provision in the recent economic stimulus law that gave him authority to review compensation to the highest-paid employees of companies that already have received federal assistance.

The bailout program remains politically unpopular and has been a drag on Barack Obama's presidency, even though the plan began under his predecessor, George W. Bush. The White House is aware of the nation's bailout fatigue -- anger that hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while others that have done no wrong have paid the price.

White House officials, for the first time, on Tuesday night said Geithner told the White House about the bonus payments last Thursday, and senior aides informed the president later that day. The officials spoke on condition of anonymity to discuss details of the timeline involving AIG.

AIG chief executive Edward Liddy can expect a verbal pummeling today when he testifies before a House subcommittee.

On Capitol Hill late Tuesday, House Democrats directed three powerful committees to come up with bills this week to authorize Attorney General Eric Holder to recover massive bonus payments made by companies like the ones paid last week by American International Group Inc.

Senate Democrats, meanwhile, suggested that if the AIG executives had any integrity, they would return the $165 million in bonus money. One leading Republican, Sen. Chuck Grassley, R-Iowa, even suggested they might honorably kill themselves, then said he didn't really mean it.

Whatever the process, lawmakers of all stripes said, the money -- generally "retention payments" to keep prized employees -- belongs back in the government's hands.

"Recipients of these bonuses will not be able to keep all of their money," declared Senate Majority Leader Harry Reid in an unusually strong threat delivered on the Senate floor.

"If you don't return it on your own, we will do it for you," echoed Chuck Schumer of New York.

Not all Democratic leaders were racing in that direction. Penalizing people with the tax code could be inappropriate, declared Rep. Charlie Rangel, D-N.Y., chairman of the taxwriting Ways and Means Committee. He said, "It's difficult for me to think of the code as a political weapon."

Others saw the connection as reasonable and relevant. House Financial Services Committee Chairman Barney Frank, D-Mass., noted that the government, through the bailout, is now an 80 percent owner of the company and suggested that was grounds to sue to recover the bonuses.

Republicans said President Obama and his administration should have leaned harder on AIG executives to reject the extra pay, raising some speculation over Geithner's future.

"I don't know if he should resign over this," said Sen. Richard Shelby, R-Ala. "He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this."

The administration quickly moved to quash talk of Geithner's ouster. White House spokesman Robert Gibbs said Obama retains full confidence in his treasury secretary. And White House chief of staff Rahm Emanuel categorically dismissed any suggestion that Geithner is in trouble.

There was a daylong rush to the microphones on Capitol Hill -- a bipartisan campaign to out-outrage each other.

Grassley led the stampede with a statement Monday night on a radio show that AIG executives should either return the money or commit suicide in what he described as the Japanese style of taking responsibility.

He spent much of Tuesday backtracking but still calling for corporate titans to take responsibility for grievous errors in judgment.

Other Republicans said Democratic leaders last month killed a plan that would have forced financial institutions to compensate taxpayers if they paid their executives large bonuses after receiving federal bailout money.

AIG is no stranger to controversy, nor is it the only publicly rescued company to give bonuses while being bailed out.

Merrill Lynch paid $3.6 billion in bonuses to its executives while its sale to Bank of America Corp., a big recipient of bailout money, was pending.

Morgan Stanley also came under fire Tuesday. Sen. Robert Menendez, D-N.J., urged Geithner to halt retention awards planned by the company's joint brokerage venture with Citigroup. Both firms have received billions of dollars in government bailout funds. Morgan Stanley is reportedly planning to pay its brokers up to $3 billion in retention payments to keep them from jumping to other firms.