A CBS News report:
American International Group Inc. used more than $90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar U.S. government bailouts.
Some of the biggest recipients of the AIG money were Goldman Sachs at $12.9 billion, and three European banks – France’s Societe Generale at $11.9 billion, Germany’s Deutsche Bank at $11.8 billion, and Britain’s Barclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans, received $6.8 billion as of Dec. 31.
The embattled insurer’s disclosure on Sunday came amid outrage on Capitol Hill over its payment of tens of millions in executive bonuses, and followed demands from lawmakers that the names of trading partners who indirectly benefited from federal aid to AIG be made public.
Lawrence Summers, Director of the White House National Economic Council, said on CBS’ Face The Nation on Sunday that the AIG bonuses were “outrageous… The whole situation at AIG is outrageous. What taxpayers are being forced to do is outrageous.”
The company, now about 80 percent owned by U.S. taxpayers, has received roughly $170 billion from the government, which feared that its collapse could cause widespread damage to banks and consumers around the globe.
In an exclusive interview aired Sunday on 60 Minutes, Federal Reserve Chairman Ben Bernanke spoke with unusual candor of the frustration he felt in bailing out AIG.
“Of all the events and all of the things we’ve done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with AIG,” Bernanke told 60 Minutes correspondent Scott Pelley.
“Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system,” Bernanke said.
“It makes me angry. I slammed the phone more than a few times on discussing AIG. I understand why the American people are angry. It’s absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy,” he told Pelley.
The $90 billion chunk of the bailout money went to banks to cover AIG’s losses on complex mortgage investments, as well as for collateral needed for other transactions.
Other banks receiving between $1 billion and $3 billion from AIG’s securities lending unit include Citigroup Inc., Switzerland’s UBS AG and Morgan Stanley.
Municipalities in certain states, including California, Virginia and Hawaii, received a total of $12.1 billion under guaranteed investment agreements.
The company said it used billions more to fund its Maiden Lane business, which was set up following the federal bailout to purchase toxic assets, and to repay debt and provide capital for some of its operations.
“I’ve been asking for this information for months. This is a good first step, but I’m concerned by how long it took,” said Rep. Carolyn Maloney, who is chair of Congress’ Joint Economic Committee.
The details from AIG came after Obama administration officials and top Republicans voiced sharp criticism over $165 million in bonus payments AIG said it must make Sunday. The contracts are part of a larger total payout which has been reportedly valued at $450 million.
In a letter to Treasury Secretary Timothy Geithner dated Saturday, AIG Chairman Edward Liddy said outside lawyers informed AIG that it had contractual obligations to make the payments and could face lawsuits if it did not do so.
Liddy said the company entered into the bonus agreements in early 2008 before AIG got into severe financial straits and was forced to obtain a government bailout.
AIG has agreed to the Obama administration’s requests to restrain future payments.
5 Responses
Of the $158 Million dollars in bonus’ at least a third of it will go straight back to the government in the form of taxes.
“VeHakeSef YaaNeh Es HaKol.”–King Solomon
How right he was. We have very little control of events, when huge quantities of money are involved.
Even the FED chairman is helpless.
Welcome to socialism.
Welcome to socialism.
The company is in business to do whatever it can to make money but when the government is involved it can only do what the government wants them to do.
As for the bonuses, people in these companies work at a low base salary with large incentives built into their contracts. If the people performed their assigned duties they are entitled to get paid for it. We don’t pay people based on the basis of importance, we pay it based on performance as well as revenue generated.
To go after AIG especially the workers who had the audacity to receive bonuses is completely ILLEGAL!!
This is socialism.
AIG is in a business to make money. Just because the govt gave them money (a whole other terrible issue!) doesnt allow the govt to now dictate what is good or not good with the company.
People who work for companies like AIG have a low base salary with a contract heavily loaded with incentives. If they meet the clauses for the incentives, they MUST be paid. Allow me to use an example most people would understand: Let’s say a baseball player is supposed to make a base salary of 200K with incentives for at bats, batting average, homers, etc., kicking in at various intervals. If the player accomplishes HIS perfomance levels, HE GETS THE BONUSES. The team wont tell him, “Sorry we finished in last place so you get nothing!” It doesnt work that way.
If people deserve the “bonus” they should get it and the govt should get out of private businesses!!