AIG Outrage Dominates Sunday Shows
Republicans and Democrats alike expressed "outrage" with the news that insurance giant AIG had decided to pay out $165 million in bonuses despite receiving $170 billion in taxpayer bailout funds. But while administration officials shared such populist indignation, they insisted that on this front their hands were tied.
"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," said Larry Summers, chairman of the White House National Economic Council, appearing on ABC's This Week.
But Summers painted the Obama administration as largely powerless to stop the cash rewards. "We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system."
The dominant thread of the Sunday talk show circuit was, indeed, AIG. On Saturday, the insurance company, dependent on taxpayer largesse, let it be known that it would be issuing contractually stipulated bonuses to company executives for bringing in a certain amount of business. Treasury Secretary Timothy Geithner informed the firm about White House displeasure with the move and demanded that the bonuses be renegotiated. The next day, a whole host of lawmakers followed suit.
"It is wrong," said Rep. Barney Frank, the chair of the House Financial Services Committee on Fox News. "This is an example of people at the commanding heights of the economy misbehaving, abusing the system."
"I do think it's important to know whether these are commission payments for products brokers have sold, or whether this is in fact a bonus," said Sen. Bob Corker (R-Tenn.), also appearing on that program. "I think those are two very different things... I will withhold [a position] until I see what it is these are being paid for."
"It is an outrageous situation," said Sen. Minority Leader Mitch McConnell on ABC. "If you are going to take the government as a partner, the message to any business out there...is 'lets enter into a bunch of contracts real quick and we'll have the taxpayers pay bonuses to our employees.' This is an outrage."
And yet, for all the anger, the administration insists it can only go so far. AIG's government-appointed chairman Edward M. Liddy said the money was needed to retain top-tier talent, and warned that some employees -- citing the language of their work contracts -- could sue the company if their bonuses were scrapped. And the president's economic advisers, while equally incensed with AIG, seemed moderately sympathetic to Liddy's point.
"I don't know why they would follow a policy that's really not sensible, is obviously going to ignite the ire of millions of people," said the president's economic adviser, Austan Goolsbee. "And we've done exactly what we can do to prevent this kind of thing from happening again. I think the root of the problem has been some of the people have things written in their contract that say, look, you sell this much life insurance, you get a bonus of x and it's in their contract and that part can't be changed.
"You worry about [a] backlash," Goolsbee added. "But you're also angry that this would happen at an institution that, you know, has been so troubled and you're trying to save. So I think that's perfectly fair."
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April 2, 2009 at 07:34 PM