President Barack Obama called AIG reckless and greedy during a blistering attack in which he pledged to try to block the insurance giant from handing its executives millions of dollars in bonuses after taking billions in federal aid.
The White House says it's trying to put strict limits on the next $30 billion installment in taxpayers' money for American International Group Inc. amid questions about whether the Obama administration responded fiercely enough to revelations of executive bonus payments.
Obama and his top aides expressed outrage at reports that AIG went ahead with $165 million in bonuses even though the company received more than $170 billion in federal rescue money. Obama directed Treasury Secretary Timothy Geithner to see whether there was any way to retrieve or stop the bonus money — a move designed as much for public relations as for public policy.
"I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama said Monday, in announcing a plan to help small businesses.
The financial bailout program remains politically unpopular and has been a drag on Obama's new presidency, even though the plan began under his predecessor, President George W. Bush. The White House is aware of the nation's bailout fatigue; hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while many others who have done no wrong have paid the price.
On Tuesday, Obama also pushed back against criticism that he's trying to take on too many issues at once, defending a $3.6 trillion budget that seeks to shore up the economy while also overhauling health care, energy and education.
Raked over the coals
"To kick these problems down the road for another four years or another eight years would be to continue the same irresponsibility that led us to this point," Obama said in a appearance with the heads of the congressional budget committees. "That's not why I ran for this office. I didn't come here to pass on our problems to the next president or the next generation."
AIG got predictably raked over the coals at a Senate Banking Committee hearing Tuesday on regulating the insurance industry.
"One way or another, we're going to try to figure out how to get these resources back," said Christopher Dodd, a Democrat from Connecticut and the panel's chairman.
"This is ridiculous," exclaimed Sen. Jon Tester, a Democrat from Montana. He said AIG executives "need to understand that the only reason they even have a job is because of the taxpayers."
Expressions of outrage across the political spectrum reached a new crescendo when Sen. Charles Grassley suggested in an Iowa City radio interview on Monday that AIG executives should take a Japanese approach toward accepting responsibility for the collapse of the insurance giant by resigning or killing themselves.
"Obviously, maybe they ought to be removed," the Iowa Republican said. "But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide."
Grassley spokesman Casey Mills said the senator wasn't calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.
AIG spokesman Nick Ashooh called the remarks "disappointing," CNBC reported.
"The remark is very disappointing, but AIG's employees continue to work with poise and professionalism to take care of policyholders and repay taxpayers," he said.
On Tuesday, Sen. Richard Shelby, ranking Republican on the Banking Committee, charged that Geithner had known about the AIG bonus payments before they were made and failed to stop them.
"I don't know what President Obama knew about it," Shelby said. "I'd say he probably didn't know about it."
Shelby said that Geithner "either knew or should have known what was going on. We need to know, what are the details of this? When were the bonuses signed up? Who's getting it?"
The Alabama senator stopped short of calling for Geithner's resignation, saying "he's under fire from all sides now."
In a letter to Geithner dated Saturday, the government-appointed chief executive of AIG, Edward Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.
Administration officials said over the weekend that Treasury determined the government had no legal authority to block the current payments by AIG — which are part of a larger total payout reportedly valued at $450 million.
Instead, Geithner asked that the company scale back future bonus payments where legally possible, the administration said.
In another development, New York Attorney General Andrew Cuomo said he has issued subpoenas for the names of AIG employees given bonuses despite their possible roles in its near-collapse.
Cuomo said his office will investigate whether the bonuses fraudulent under state law because they were promised when the company knew it wouldn't have the money to cover them.
AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history, and it has benefited from more than $170 billion in a federal rescue.
News that AIG still needs billions in taxpayer dollars to prevent a collapse did little to build public confidence, Obama aides acknowledged. Seeking to turn the public tide, White House spokesman Robert Gibbs aggressively criticized AIG and said administration officials were working to put strict limits on the next $30 billion installment bound for the company.
"Treasury has instruments that can address the excessive retention bonuses, and add provisions to ensure that taxpayers are made whole," Gibbs said.
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