AIG scandal
As part of a bid to prevent the insurer’s failure, the U.S. settled derivatives and loan contracts worth $32.7 billion withGoldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale, Deutsche Bank AG and UBS AG. That’s about half the $66.7 billion that those companies, the five biggest beneficiaries of loans and capital infusions for AIG, said they spent on pay and benefits last year for employees, some of whom created or traded toxic subprime assets that proved deadly for lenders.
The bonuses paid by AIG and the banks were allowed under a congressional exemption from compensation limits on companies getting government rescue funds. The Treasury staff requested the exception to avoid lawsuits over agreements signed before Feb. 11, SecretaryTimothy Geithner said last week.
“The issue of excessive compensation extends beyond AIG and requires reform of the system of incentives and compensation in the financial sector,” Geithner said today in testimony prepared for the House Financial Services Committee.
AIG’s bonus payments were “deeply troubling,” Geithner said. The Treasury secretary said he demanded that the compensation contracts be renegotiated and was told by Chief ExecutiveEdward Liddy that they were “legally binding.”
90 Percent Tax
The $165 million paid to employees of New York-based AIG represents 0.0014 percent of the $11.6 trillion committed by the government to combat the credit crisis, according to data compiled by Bloomberg. The $32.7 billion is 0.3 percent of the total federal loans, guarantees and cash. Nine out of the top 10 recipients of the insurer’s bonuses agreed to give the money back, New York State Attorney General Andrew Cuomo said yesterday.
The AIG bonuses prompted the House of Representatives to approve a 90 percent tax on bonuses to workers at companies that received more than $5 billion in capital from the Troubled Asset Relief Program.
Geithner said last week that the Treasury’s staff asked Senator Christopher Dodd, a
The bonuses paid by AIG and the banks were allowed under a congressional exemption from compensation limits on companies getting government rescue funds. The Treasury staff requested the exception to avoid lawsuits over agreements signed before Feb. 11, SecretaryTimothy Geithner said last week.
“The issue of excessive compensation extends beyond AIG and requires reform of the system of incentives and compensation in the financial sector,” Geithner said today in testimony prepared for the House Financial Services Committee.
AIG’s bonus payments were “deeply troubling,” Geithner said. The Treasury secretary said he demanded that the compensation contracts be renegotiated and was told by Chief ExecutiveEdward Liddy that they were “legally binding.”
90 Percent Tax
The $165 million paid to employees of New York-based AIG represents 0.0014 percent of the $11.6 trillion committed by the government to combat the credit crisis, according to data compiled by Bloomberg. The $32.7 billion is 0.3 percent of the total federal loans, guarantees and cash. Nine out of the top 10 recipients of the insurer’s bonuses agreed to give the money back, New York State Attorney General Andrew Cuomo said yesterday.
The AIG bonuses prompted the House of Representatives to approve a 90 percent tax on bonuses to workers at companies that received more than $5 billion in capital from the Troubled Asset Relief Program.
Geithner said last week that the Treasury’s staff asked Senator Christopher Dodd, a