AIG Bonuses: Consulting With Obama Administration On Plans To Pay Out Millions Of Dollars

NEW YORK — American International Group Inc. is consulting with the federal government about its plans to pay millions of dollars in retention incentives and bonuses, a person familiar with the situation said.

AIG is working with the Obama administration's compensation czar, Kenneth R. Feinberg, to ensure the government and the insurer are on the same page before it pays out remaining bonuses due to employees tied to 2008 contracts, according to the person, who requested anonymity because of the sensitive nature of the talks.

New York-based AIG faced intense public and Congressional criticism in March when it paid out hundreds of millions of dollars in retention bonuses to employees months after receiving a bailout from the government.

The latest round of bonus payments has brought fresh anger from some on Capitol Hill.

"The reason that company collapsed and needed to be bailed out was because of the recklessness and irresponsibility of their top management" who took bonuses, said Independent Sen. Bernie Sanders of Vermont. "At a time when millions of Americans are losing their jobs and seeing declines in their incomes, I think it is an outrage that anyone on the AIG leadership team is receiving (even) 5 cents in bonuses."

Some of the bonuses AIG is planning to pay out were promised to employees in 2008, before the government stepped in to ensure AIG would not collapse. Additional retention payments were awarded in an effort to keep executives from leaving the company after the government's initial bailout.

In September, the government provided AIG with an $85 billion rescue package amid the mushrooming credit crisis. In return, the government took about an 80 percent stake in the New York-based insurance giant. Since then, the government has provided additional rounds of support. AIG's available loan package now totals $182.5 billion, though it has not tapped all of the funds.

The latest round of bonus payments will include about $235 million for employees at AIG's financial products unit, according to a Wall Street Journal report. AIG's near collapse was not due to its traditional insurance operations, but instead risky derivatives contracts written by the financial products division. AIG is in the processing of winding down that unit.

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AIG is also scheduled to pay out another portion of a much smaller set of bonuses to 40 high-ranking AIG executives. The 40 executives were awarded about a combined $9 million in bonuses for 2008. The insurer paid out half of the bonuses in March and is supposed to pay out the remainder in two installments, the first of which is scheduled for next week.

AIG is among the companies whose pay practices the government now oversees. But while AIG is discussing the outstanding bonuses with Feinberg, he cannot ultimately veto the upcoming payments.

Feinberg does have the power to reject pay plans he deems excessive at companies that benefited from large infusions from the government's $700 billion bank bailout fund. However, those powers only begin with pay packages for 2009 and can't be retroactively applied to 2008 compensation.

Feinberg also now has authority to review compensation for the top 100 salaried employees at those firms.

While not commenting specifically on the AIG bonus discussions, a Treasury Department administration official said Feinberg will help to ensure companies balance the need to retain talent, reward performance and protect taxpayers' investments.

"That process is just beginning now, and Mr. Feinberg has begun consulting with those firms about their compensation plans," the official said. "We are not going to provide a running commentary on that process, but it's clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."

Hundreds of financial firms received money as part of the government's $700 billion program. Many of the largest banks have been repaying those funds quickly, in part, to enable avoiding scrutiny and restrictions on how they pay top executives.

AIG has been selling assets to raise cash in an effort to repay the government loans. It is also planning to spin off three of its major insurance subsidiaries into separate companies to raise capital necessary to pay back the government.

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AP Economics Writer Martin Crutsinger and AP Business Writer Marcy Gordon in Washington contributed to this report.

Comments

[denicci1977]

H E L L NOOOOOOOOOOO !!!! What is wrong with these people ? Anyone who gets a welfare bailout/handout should not be rewarded regardless of any reason. Republicans think trickle down works so well, well then trickle down those bonuses to the taxpayers instead.

[Kiana1]

AIG, the answer is "NO YOU CAN'T".

[Mister Wu]

Who's money are they using for that! How can they give out what they don't have? If it's the governments money then we should have a say.

[polybius]

There sure is a lot of scrubbing going on in this thread by HP. why??

Its amazing that our masters over at AIG have to go to their puppets in the government at all. Weird.
Obey AIG!

um....why is huffingtonpost sens*ring the comments on this? hacked?

[just saying]

How much you want to bet he'll be totally against this publicly (he's a politician) but they'll get the wink/nod in the back room. Brilliant!

[mpak]

Should have let them fail

[just saying]

Never gonna happen...they have govt in their pockets. These guys pull govt's strings, not the other way around! Watch on youtube:
http://www.youtube.com/watch?v=eAaQNACwaLw

[Didactic Curveball]

At this point, perhaps we should let this company fail. We are now throwing good money after bad. Despite the billions of taxpayer dollars given to AIG, the company continues to fail, all the while seeking justification (a la contractual obligations) to dole out hundreds of millions of dollars in employee bonuses. There is no amount of money that we, the taxpayers, can give to AIG that will turn the company around enough to stabilize our sick economy. The sacrifices made by the American public have done little more than line the already deep pockets of those who created this disaster (and continue to profit from doing so).

[StoicRep]

This is a sure sign that the government is corrupted by the bankers, and the bankers are in collusion. The are wedded to the idea of large over-leverage in foreign investments as a sort of "success". They are pledged to continue down this path until it pays off, effectively leaving business in the domestic US in the dust, regardless of its competitiveness. THESE PEOPLE ARE TREASONOUS, and saying the US is a republic does not cover it. The government must address the needs of its people and this government is not.

[kwinyan]

The article left out the AIG has an equity value of next-to-nothing, despite the 182.5 billion bailout.

[kwinyan]

the article left out that . . . .

[persimmon8]

This is insanity!!! When will it stop? We need to let them fail and create new institutions based on accountability and real regulation.

When any system breaks down, a new system must emerge---to replace it.

Let's demand this and stop throwing good money after bad. We need to create institutions and businesses that meet real needs...and not the needs of a few to get rich.

[Mike Keough]

Lots of good stuff being posted here regarding this issue. For me it is rather simple. We have had almost a year of promises regarding transparency, oversight, fairness... , for me that means prosecutions, not bonuses. That this has not happened does not surprise me, but it does piss me off. The people who are looking for bonuses are the people who contribute the most to the Congressmen who ae supposed to set the "new regulations." That does not surprise me. They are elected people, looking for reelection and lobbyist jobs after they retire. Sorry, I forgot, what is the average net worth of the Congress? How do they live their lives? Do their kids go to public school? They have savaged our economy and the lives of millions of hard working Americans. I believe that the Federal Government should have Nationalized all of the Wall Street banks, sold them off in parts, and renegotiated every single person's pay. Lowering every one. NO BONUS!

[southerncharm]

Of course AIG has to consult with the O' administration to tell them how big of piece of pie they're getting via "political contributions".

[jsgaetano]

Now we know why AIG isn't being broken up, isn't getting oversight, etc.

[sparky73]

Its about time the President standardizes salaries all across the board for every job in America. Nobody should make more than the President period. If you have a business where you make more than the President the additional income should be taxed 100%. It's only fair.

Nobody deserves to make more than 400 grand a year

[southerncharm]

Then that would make us right on track to socialism/­communism! Try telling all those hollywood Obamaniacs they can't make more than 400 grand a year!

[sparky73]

They will understand because its coming from our President, THEIR President. Socialism looks like the only choice since capitalism has failed here. I think it is time for a new constitution.

All people want are:
-Free Healthcare
-Taxes only paid by people making more than 200K a year
-Union jobs that will never leave this country
-The end of different classes.
-More social programs
-expanded goverment.

To me, it sounds like most of the people want socialism and not capitalism.

[LynnW49]

" The latest round of bonus payments will include about $235 million for employees at AIG's financial products unit . . . AIG's near collapse was not due to its traditional insurance operations, but instead risky derivatives contracts written by the financial products division. "

Unless their contracts explicitly say that their bonuses are NOT tied to performance, then it seems not only legal, but responsible to cut those bonuses out altogether, or to pay reduced forms for some employees whose efforts did not lead to the collapse of our economy. It is not just about money; this group at AIG ruined the lives of ordinary Americans. Giving them bonuses for doing it is like rewarding drunk drivers.