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Jacqueline Leo

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The Infuriating, Inexcusable AIG Tax Deal

Posted: 03/ 2/2012 9:33 am

If you believe that the Tea Party and Occupy Wall Street would only join forces "when hell freezes over," then start building your ark. American International Group, the infamous insurance company that got $85 billion in government bailout money in 2008, and promptly spent $440,000 on a corporate retreat, is going to make your blood boil again.

After receiving a second, equally generous loan in 2009, AIG management had the unmitigated gall to announce that the same executives who insured toxic assets like mortgage-backed securities would get $165 million in "retention bonuses."

When New York Gov. Andrew Cuomo, otherwise known as the "Bonus Buster," got wind of the payouts, he added AIG to his hit list of companies planning to give executives bonuses even though the firms were saved by TARP bailout funds. According to New York Magazine, Cuomo pressured Congress to release the names of AIG's bonus babies, prompting AIG CEO Robert Benmosche to fire back, "The worst thing that will ever happen to him is when he and I meet in the room and I close the door," said Benmosche. "I ain't going to meet with him with anybody else in the room. I won't tell you what I'll say to him, but I will tell you there won't be a nice word."

Andrew Ross Sorkin, author of Too Big to Fail, wrote in a recent column for The New York Times that AIG reported a $19.8 billion profit for its fourth quarter. But $17.7 billion of that was a gift from taxpayers in the form of a generous tax benefit. AIG earned $1.6 billion during that quarter but will probably not pay a cent in taxes. Nor, according to Sorkin, are they likely to pay taxes for the next ten years!

Wait, there's more! The tax deal, which allowed AIG to spread its losses over many years and therefore erase its tax burden, was engineered by the U.S. Treasury after the federal government took control of AIG. Sorkin asks the key questions: "How did this happen? Why would Treasury exempt AIG from the law? And if taxpayers own a majority of AIG, aren't we the beneficiaries of the rule-bending?"

But here's the kicker: The tax breaks pumped up AIG's stock, making the company's C-suite execs even richer. The top beneficiary is, of course, Benmosche, whose total compensation sans stock gains was $7 million last year, according to Forbes.

So, this spring, when the Occupy Wall Street crowd comes out of hibernation, don't be surprised if the Tea Party joins them at a new location: 70 Pine Street, the N.Y. corporate headquarters of AIG.

 
 
 

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