Outrage over bailed-out insurer American International Group paying millions of dollars in bonuses reached a full bipartisan boil on Capitol Hill on Monday, with Members calling for all manner of reprisals — from firing the company’s executives and yanking government aid from the firm to pushing for a tougher crackdown on Wall Street.
President Barack Obama ordered Treasury Secretary Timothy Geithner to use all legal means available to try to recover the money, in line with a bipartisan chorus of fury in a blizzard of press releases. AIG paid out $165 million in bonuses last week, a move that came despite the firm’s having received $170 billion in federal bailout money over the past year.
“How do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama asked.
Nearly 80 Democratic lawmakers penned a letter to Geithner Monday night urging him to stop the bonuses. And Speaker Nancy Pelosi (D-Calif.) called on AIG’s executives to forgo their bonuses voluntarily.
“If they refuse, the U.S. Treasury should use whatever tools at its disposal to make AIG repay taxpayers,” she argued. “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.”
AIG Chief Executive Officer Edward Liddy will face a passel of angry lawmakers at a House Financial Services subcommittee hearing Wednesday, and Financial Services Chairman Barney Frank (D-Mass.) suggested on NBC’s “Today” show Monday that heads should roll at the firm.
“Maybe it’s time to fire some people,” Frank said, pointing out that the federal government now owns 80 percent of AIG. “We can’t keep them from getting their bonuses, but we can keep some of them from continuing in their jobs.”
Other Members, however, said Geithner should hold the threat of bankruptcy over the company’s head to demand concessions on bonuses.
Rep. Darrell Issa (R-Calif.), ranking member of the House Oversight and Government Reform Committee, said on FOX News that government can still halt the last batch of $30 billion in bailout funds from going to the giant insurer. The government “can at any given time say, ‘We’ve given up. File bankruptcy,’ and that would include this last $30 billion, which would allow them to, quite candidly, relook at these contracts,” he said.
Some Democrats also said Geithner should have withheld any additional funding.
“I am reminded of the saying, ‘Fool me once, shame on you. Fool me twice, shame on me,'” Rep. Phil Hare (D-Ill.) said in a statement. “The Treasury’s decision to pour more money into AIG was a mistake given their record.”
House Republican Policy Committee Chairman Thaddeus McCotter (Mich.) ripped what he called a double standard, whereby the government is demanding that beleaguered auto companies rework contracts with auto workers before getting a bailout, but did not demand the same with AIG and its derivatives traders.
“The time has come to cut off all taxpayer support for AIG, break it up, and end its bleeding of American taxpayers,” McCotter said.
And Rep. Elijah Cummings (D-Md.) renewed his call for Liddy to resign.
Cummings has been railing against AIG bonuses since last year, complaining that more than $1 billion in compensation is planned across the company, not just the money given out last week to its traders.
Cummings and other lawmakers want the Treasury to prohibit AIG from offering contracts with bonuses until the federal government has been repaid.
Democrats had already been working to create tough new rules governing financial institutions like AIG, and Monday’s furor over the bonuses could bolster that effort.
“It will allow us to continue to be aggressive on holding Wall Street accountable, and it is a reminder of the excesses that the current administration and Congress inherited,” said a House Democratic aide.
The aide also did not think the issue would hurt Democrats, because most of the party’s most vulnerable lawmakers voted against the Wall Street bailout funding. Even though AIG didn’t receive any money from that $700 billion bailout — its aid came directly from the Federal Reserve — Democrats recognize that the public doesn’t necessarily differentiate one bailout from another.
The bonus issue could complicate any plans the Obama administration may have to seek additional funding for ailing financial firms. House Minority Leader John Boehner (R-Ohio), who supported the initial $700 billion rescue, used AIG’s bonuses to again call on the administration to come up with an “exit strategy” for all of the financial bailouts.