Outrage over AIG paying bonuses from bailout money

US insurance giant AIG's plan to give massive bonuses of $165 million to its executives has drawn flak from the White House leaders, with President Barack Obama vowing to pursue legal avenue to block these payments.

"This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said yesterday.

"I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?"

Obama has directed the Treasury Department to look into ways and means to stop payment of such bonuses.

 

"In the last six months, AIG has received substantial sums from the US Treasury. I've asked (Treasury) Secretary (Timothy) Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole," he said.

White House Press Secretary Robert Gibbs said: "This isn't just outrageous and doesn't just sort of violate your sense of commonsense, but it offends our values."

Any person who is subject to these bonuses would have to and should think long and hard about whether, given the performance of the company, this is either warranted or appropriate, Gibbs observed.

The House of Representative Speaker, Nancy Pelosi, in a statement said AIG has turned on its head the basic principle that bonuses and retention payments are rewards for outstanding performance.

Pelosi said AIG executives should voluntarily forgo their excessive retention payments. "But if they refuse, the US Treasury should use whatever tools at its disposal to make AIG repay taxpayers," she said.

No taxpayer funds should be used to pay bonuses or other unjustified compensation to AIG executives whose irresponsible risk-taking brought our financial system to the brink of collapse," she said.

The Federal government had pumped about USD 170 billion into the ailing American International Group.

Pelosi warned that this week, Congress will demand further answers from AIG on the steps the government- controlled company will take to repay taxpayers.

Several lawmakers were harsh on AIG as news report about bonuses came in.

Senator Chuck Grassley, a Ranking Republican on the Senate Finance Committee, said the IAG executives should consider following what he described of the Japanese model of shamed corporate executives: apology or suicide.