Outrage against AIG set to mount

Insurer discloses $90bn payout to banks amid backlash over $165m bonus for employees.

    AIG is the largest recipient of taxpayer bailout money so far at $173bn [EPA]

    Through three separate types of transactions, Goldman Sachs received $12.9bn. Among the European banks, Societe Generale was the biggest recipient at $11.9bn, Deutsche Bank got $11.8bn and Barclays was paid $8.5bn, AIG said.

    The list was made public by AIG amid growing pressure on the insurer to disclose the true beneficiaries of the bailout, ahead of a congressional hearing on Wednesday at which Edward Liddy, AIG's chairman and chief executive, is expected to testify.

    Anger over bonuses

    Over the weekend, US government officials and politicians expressed outrage at the $165m in bonuses AIG is paying its employees.

    AIG, which has already received US taxpayer bailouts of more than $170bn, argues that if it does not pay, it risks lawsuits by disgruntled employees and risks losing workers trying to clean up the company's financial mess - some $1.6bn in derivatives linked to toxic mortgages.

    AIG declared earlier this month that it had suffered a loss of $61.7bn for the fourth quarter of last year, the largest corporate loss in history.

    The insurance company says it is paying out the bonuses to meet a Sunday deadline, but it has agreed to requests by the Obama administration to restrain future payments.

    The administration expressed unhappiness over the payouts but the US treasury department determined that the government did not have the legal authority to block the current payments.

    Lawrence Summers, the director of the National Economic Council, told local media on Sunday that the bonuses were "outrageous".

    Summers said Timothy Geithner, the treasury secretary, had "negotiated very forcefully" with AIG and done all that was "legally permissible" to limit the payments.

    But he added: "We are a country of law. There are contracts. The government cannot just abrogate contracts."

    The large bulk of the payments at issue cover AIG Financial Products, the unit of the company that sold credit default swaps, the risky contracts that caused massive losses for the insurer.

    AIG said it was contractually obligated to pay $165m of previously awarded "retention pay" to employees of the unit by March 15.

    'Hands tied'

    Geithner has asked AIG to scale back future bonus payments where legally possible, an administration official said.

    In a letter to Geithner dated Saturday, Liddy said that "quite frankly, AIG's hands are tied", although he said that in light of the company's current situation he found it "distasteful and difficult" to recommend going forward with the payments.

    Liddy said the company had entered into the bonus agreements in early 2008 before AIG got into severe financial straits and took a government bailout last fall.

    The company said it would work to reduce the amounts paid for 2009 and believed it could trim those payments by at least 30 per cent.

    Bonus programmes at financial companies have come under close scrutiny after the government began loaning them billions of taxpayer dollars to keep them afloat, and AIG is the largest recipient of bailout money so far.

    SOURCE: Al Jazeera and agencies


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