Andrew M. Cuomo, Attorney General of New York State, has, according to The New York Times, announced that:"Seventy-three employees were paid more than $1 million in the latest bonuses at the insurance giant American International Group."
Cuomo disclosed information in a written communication to Congressman Barney Frank, chairman of the House Committee on Financial Services regarding "the $165 million in bonuses that A.I.G. paid out last week."
Mr. Cuomo wrote “A.I.G. made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout,”“A.I.G. made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout.” Cuomo observed that: “Something is deeply wrong with this outcome.”
"Mr. Cuomo did not name the bonus recipients, but the numbers are eye-popping, given A.I.G.’s fragile state. The highest bonus was $6.4 million, and six other employees received more than $4 million, according to Mr. Cuomo. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses between $1 million and $2 million, Mr. Cuomo said. Eleven of those who received “retention” bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million, he said.
The New York Times explains that: "A.I.G., which is now 80 percent owned by the government, paid out the so-called retention payments, saying the bonuses were needed to persuade workers to stick around in its financial products unit. But the payouts have caused a public furor, and the White House said on Monday that the Treasury would write new requirements about the bonus money in the next $30 billion that it provides to the insurance giant. Already, the government has given A.I.G. $170 billion."
By Tuesday of this week House and Senate members as well as administration officials were "called on A.I.G. to rescind the bonuses and warned that they would introduce legislation to recoup the money, including the threat of a tax on A.I.G. employees."
"Senate Democrats will seek to recoup $165 million in bonuses paid to executives of the troubled insurance giant American International Group through a narrowly focused tax, unless the money is returned voluntarily, party leaders announced this morning."
"Harry Reid, Senate Majority Leader announced that Max Baucus, Finance Committee Chairman are scheduled to "unveil a proposal by tomorrow that would tax up to 98 percent of the bonus money. "That will certainly send a message to the people at AIG and all others who try to benefit from the hardships the American people face," Reid said.
On the House side Congressmen Steve Isreal and Tim Ryan "introduced the "Bailout Bonus Tax Bracket Act" to create a 100 percent tax on bonuses over $100,000 that are distributed to employees of financial firms receiving federal bailout funds. Currently, the IRS withholds 25 percent from bonuses less than $1 million and 35 percent for bonuses more than $1 million dollars. The Israel-Ryan proposal would apply to all bonuses to government-supported firms such as AIG that have been given since Jan. 1.
Mr. Frank added his opinion that regarding A.I.G. the moment had arrived "to exercise our ownership rights.”
Frank spoke out against the A.I.G. Bonus recipients to say “I think we should be suing to get the bonuses back as the owner.”
Chairman Frank attacked the necessity for paying out "retention bonuses" in a badly preforming economy by claiming that: "“It is hardly a tough market for hiring people with financial expertise.”
Although long planned, "the AIG bonuses have sparked bipartisan outrage on Capitol Hill and place in serious jeopardy the prospect of further aid to the banking sector. AIG took huge risks with its investments in credit default swaps, an unregulated market that collapsed in the credit crisis and, it received more than $170 billion in taxpayer bailout money in the past year as a result of the financial meltdown. The company has received more bailout money than any other single firm, and is now 80 percent government-owned."
"The bonuses, guaranteed through employment contracts that had been made public to the government earlier and paid out on Friday, were offered as a way to lure or keep top talent to help sort out the financial situation at AIG, officials there said. But when news of the payments surfaced in recent days, lawmakers turned to the Obama administration, demanding that the U.S. Treasury attempt to claw back some of the money."
"Despite serious efforts to stop the bonuses, the administration apparently was unable to stop the payments. Yesterday, President Obama expressed his unhappiness with the bonuses and directed government lawyers to review the company's contracts to see whether provisions guaranteeing the bonuses can be overturned. The administration also last week persuaded the company to restructure some of the payments, and the top seven AIG executives had earlier agreed to forego their bonuses through this year."
New York State Attorney General Cuomo, according to New York Times reports: "subpoenaed A.I.G. on Monday for the names of the people who shared in the new bonus pool." Cuomo went on to say "the fact that 11 people who received some of the money were no longer at A.I.G., raised questions about whether the bonuses were truly for retention purposes."
The New York Times speculated that: "Mr. Cuomo may be able to use a state law about fraudulent conveyance to force A.I.G. to rescind the bonuses. Mr. Cuomo would have to show that A.I.G. was undercapitalized when it paid the bonuses and that the people who received the bonuses did not earn them."
During an interview this past Monday, Mr. Cuomo said: “I understand they (A.I.G.) have contracts,... That’s not necessarily determinant because a lot has happened since that contract was signed.”
The New York Times concludes by explaining that: "A.I.G. altered some of its practices last fall after discussions with Mr. Cuomo. The company canceled about $160 million in planned expenses for conferences as well as $600 million in payouts in deferred compensation plans after Mr. Cuomo threatened to sue the company."
Majority Leader Reid stated "We as a Congress are not defenseless,... We can also do things."
Senator Charles Schumer was summarized by The Washington Post as having said: "AIG executives would be given an opportunity to pay back the bonus money voluntarily, before being hit with the tax" and was directly quoted by The Washington Post "If you don't return it on your own (referring to AIG oficials), we will do it for you," Schumer said.
The Washington Post explained that: Senator Charles Grassley, the ranking member of the Senate Finance Committee has intimated that: "The tax idea has quickly gained momentum as the quickest and most efficient method for capturing the bonus money." Grassley stated to Max Baucus: "I want to back you up on looking into that and doing what we can to make sure these things don't happen in the future."
Senator Christopher Dodd, chairman of the Senate Banking Committee, has proposed "to write a tax provision in a way that is specifically targeted to that audience."
The Washington Post has speculated that Dodd's action "to write a tax provision in a way that is specifically targeted to that audience:"to write a tax provision in a way that is specifically targeted to that audience."
When speaking to reporters today, Steny Hoyer, trying to arouse public sentiment against AIG executives proclaimed: "Have they no shame, have they no sense of responsibility to American taxpayers? . . . Have they no sense of decency?"
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