Picking up on a call by one of the loudest congressional critics of the
no-strings-attached bailout of banks and insurers, President Obama
today ordered Treasury Secretary Timothy F. Geithner to pursue legal
challenges to the American International Group's plan to pay out
hundreds of millions of dollars in bonuses to executives.
"In the last six months, A.I.G. has received substantial sums from
the U.S. Treasury," Mr. Obama said of the embattled insurance giant
that wants to give one percent of its bailout buckage to the people who
made the mess -- and have yet to find a way out of it.
A.I.G., which intends to pay its executives $165 million in bonuses, has collected $170 billion from the federal government.
Sensing a heist could be taking place, Obama is deputizing Geithner to block what looks like bailout banditry.
The president told his treasury secretary "to use that leverage and
pursue every single legal avenue to block these bonuses and make the
American taxpayers whole."
That's precisely the approach urged on the White House by Wisconsin
Senator Russ Feingold, a lawyer and veteran member of the Senate
Judiciary Committee, who raised the call for a legal strategy with
regard to A.I.G.
Feingold began pressing Geithner after details regarding the A.I.G.
bonuses became public to explore legal options for canceling the
bonuses, recouping the money from the recipients, or suing the
executives for breaching their fiduciary duties to AIG shareholders.
In a letter to Geithner, the senator wrote:
I am deeply troubled by reports that the American
International Group intends to pay about $165 million in bonuses to its
executives. As you know, the federal government has provided AIG with
$170 billion in taxpayer money and currently owns 80 percent of the
company. I share your outrage that a company which has been bailed out
by the taxpayers for its mistakes would turn around and pay its
executives such a staggering sum of money.
Reports suggest that AIG's chairman claims AIG is legally obligated
to pay some or all of these bonuses. I write to ask why any bonuses
would be legally required, given the company's abysmal performance. In
addition, I would like to know what legal options have been explored
for canceling the bonuses or recouping the money from the recipients,
and in particular whether the administration has considered holding AIG
executives accountable in court for any breaches of their fiduciary
duties to the shareholders.
Feingold, one of the handful of senators who was smart enough to oppose
the no-strings bailout, rejects AIG's ridiculous -- and, frankly,
insulting -- defenses of the bonuses.
AIG says the money is needed to attract "talent." Feingold replies,
"Since some of the recipients of these bonuses may have been
responsible for the practices that drove the company to the brink of
collapse -- jeopardizing the financial system -- I am sure many
Americans will question whether they are indeed 'the best and the
brightest' and whether they deserve this level of taxpayer-subsidized
compensation."
That's the right analysis, as Feingold notes. "President Obama is
doing the right thing by pursuing all legal options to cancel these
bonuses," says the senator. "At a time when millions of Americans are
losing their jobs and trying to make ends meet, it is outrageous that a
company that has been bailed out by the taxpayers for its mistakes
would turn around and pay its executives such a staggering sum of
money."
Obama's move signals that his administration will be more serious than
George Bush's when it comes to holding bad bankers to account.
That's good news. But Feingold, Vermont Senator Bernie Sanders, Ohio
Congresswoman Marcy Kaptur and other progressive-populist critics of
the bailout won't be resting.
Blocking the A.I.G. bonuses is merely the first step in bringing an
end to the bipartisan neglect of real economics and real responsibility
that, over the past several decades, created the crisis that has spread
from Wall Street to Main Street.
