President Obama and Treasury Secretary Timothy F. Geithner to Block A.I.G. Bonuses

For more information regarding the White House Blog's explanation of the President's invitation to "small business owners to the East Wing of the White House to discuss ways the government could help them stay above water," click here.

Later in the day President Obama and Treasury Secretary Timothy F. Geithner met to sharply criticize "the greed and excess displayed in reports of tens of millions of dollars in bonuses being given out to employees of AIG,"

President Obama was particularly sharp tongued against the excesses of executives of AIG:

"I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole. (Applause.) I want everybody to be clear that Secretary Geithner has been on the case. He's working to resolve this matter with the new CEO, Edward Liddy -- who, by the way, everybody needs to understand came on board after the contracts that led to these bonuses were agreed to last year.

"But I think Mr. Liddy and certainly everybody involved needs to understand this is not just a matter of dollars and cents. It's about our fundamental values. All across the country, there are people who are working hard and meeting their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses. You've got a bunch of small business people here who are struggling just to keep their credit line open -- that they are foregoing pay, as one of our entrepreneurs talked about, they are in some cases mortgaging their homes, and doing a whole host of things just in order to keep things afloat. All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. And that is an ethic that we have to demand.

"And what this situation also underscores is the need for overall financial regulatory reform, so we don't find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions, so that we've got greater authority to protect American taxpayers and our financial system in cases such as this."

Later in the day, a White House official disclosed that the administration would use a pending $30 billion installment for A.I.G. to recoup the $165 million in retention payments to A.I.G. employees in the business unit that brought the company to the brink of collapse last year.

“Treasury will be using this facility to address the excessive retention payments made to the A.I.G. Financial Products employees, which Treasury found to be completely unacceptable given that A.I.G. is already surviving on taxpayer funds,” said the official, who spoke on the condition of anonymity. “Treasury will be adding provisions to its new facility aimed at making taxpayers whole for the amounts of the offensive payments.”

A variety of "repayment options" are under consideration according to administration officials.

"Later in the day," according to the New York Times, "a White House official disclosed that the administration would use a pending $30 billion installment for A.I.G. to recoup the $165 million in retention payments to A.I.G. employees in the business unit that brought the company to the brink of collapse last year.

“Treasury will be using this facility to address the excessive retention payments made to the A.I.G. Financial Products employees, which Treasury found to be completely unacceptable given that A.I.G. is already surviving on taxpayer funds,” said the official, who spoke on the condition of anonymity. “Treasury will be adding provisions to its new facility aimed at making taxpayers whole for the amounts of the offensive payments.”

"White House officials said that the administration is not looking to take A.I.G. to court to stop the company from paying out the bonuses. But they said the Treasury Department would be trying to figure out what it can do to block A.I.G. from making the payments within the legal confines of A.I.G.’s contractual obligations to the executives."

"The sharp presidential rebuke of A.I.G. is part of the White House effort to distance itself from abuses that could feed potentially disruptive public anger," explained The New York Times. "Mr. Obama’s aides are worried that such anger could make it more difficult to win Congressional approval for the additional bailout packages that Mr. Obama has signaled may be necessary to stabilize the banking system. Already there have been moves in Congress to limit compensation for executives at banks and Wall Street firms that are receiving government help to survive."

"Still, the president’s directive to his Treasury secretary to “pursue every legal avenue” against the payments seemed to conflict with statements over the weekend from the Treasury Department and from Lawrence H. Summers," The New York Times explained. "Mr. Obama’s chief economic adviser in the White House, that the Treasury already had reviewed its legal options and concluded the administration had no power to stop the payments."

“We are a country of law,” Mr. Summers said on ABC-TV’s Sunday show. “This Week”: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,”

"But increasing the pressure on A.I.G., New York State Attorney General Andrew M. Cuomo said on Monday that he would issue subpoenas to make the insurer release the names of the executives in its Financial Products subsidiary who received the bonuses, which were paid on Friday; their job descriptions, and details about their performance. In a letter to Edward M. Liddy, the company’s current chief executive, Mr. Cuomo said that if he did not receive the information by 4 p.m. he would issue subpoenas demanding compliance. After that deadline passed, Mr. Cuomo said that he had not received information he was seeking and would issue subpoenas for the data."

“I believe in transparency and disclosure,” Mr. Cuomo said on a conference call. “We believe taxpayers have a right to know.”

"A.I.G. executives say that they are contractually obligated to pay the bonuses to their executives, including those who are part of the A.I.G. division where the company’s crisis originated.

"The government’s rescue of the insurer began last fall with the Federal Reserve’s $85 billion emergency loan. The taxpayer assistance has now grown to $170 billion, and the government owns nearly 80 percent of the company. On Sunday, the company disclosed the names of dozens of financial institutions that benefited from the bailout money injected into A.I.G. that the insurer then paid out to satisfy financial contracts."