White House orders legal action over bonuses for AIG traders
Tuesday 17 March 2009
Employees at AIG's London-based derivatives business face losing $165m (£117m) in retention bonuses amidst a political firestorm in the US. Barack Obama stepped in to the row yesterday to order that AIG, which was nationalised by the US government to stop it going bust last year, use all legal means to avoid paying the bonuses.
A White House official last night suggested that a $30bn cash infusion from the government, which was announced two weeks ago but has not yet been paid, could be made contingent on the scrapping of the payments.
The financial products division wrote insurance on trillions of dollars of mortgage derivatives and other credit market instruments, but proved unable to meet its obligations when the economy went into a dive. Some $170bn in US government money has gone to pay off trading partners.
It has emerged that financial products group employees will receive $450m in bonuses. Mr Obama called it an "outrage" and demanded that the Treasury use its leverage and "pursue every legal avenue" to have the payments rescinded.
"This is a corporation that finds itself in financial distress due to recklessness and greed," he said. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?"
New York's attorney-general, Andrew Cuomo, was also circling the company yesterday, demanding to know who was getting the cash and whether the company could avoid paying out by claiming the money was the proceeds of fraud. Mr Cuomo said he would issue subpoenas if AIG didn't voluntarily surrender the names of the employees receiving bonuses. "Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system," he said.
The political row has only intensified since news of the bonuses emerged. Over the weekend, Larry Summers and Austan Goolsbee, Mr Obama's two top economic advisers, both described the payments as outrageous, but suggested that there had been no way to legally stop them.
Yesterday, Barney Frank, chairman of the House of Representatives financial services committee, said that many of the employees should be fired to save money, if there was really no way to stop the payments.
The money is coming out of a pool for retention bonuses, so that AIG can keep staff it needs to help wind down the derivatives business, the insurer has said. The process of unpicking its network of trading relationships has proved even more complex than it seemed last September, when the government decided the company was too big to let fail.
Over the weekend, AIG revealed details of which trading partners received the largest payments of government money during its first three-and-a-half months on government life support. The payments included additional collateral for existing obligations and purchases of outstanding credit default swaps, designed to close the trading positions.
Through three separate types of transactions, Goldman Sachs received an aggregate $12.9bn. Among European banks, SocGen was the biggest recipient at $11.9bn, Deutsche Bank got $11.8bn and Barclays had $8.5bn.
Hundreds arrested as Canadian police smash worldwide paedophile ring
Ja Rule forced to deny leaving wife for prison cell mate
Nelson Mandela: 11 inspirational quotes to live your life by
Ryanair calls on CAA to act over air traffic chaos caused by telephone system glitch
Crash pilot who threatened Ukip leader Nigel Farage found dead
- 1 Hundreds arrested as Canadian police smash worldwide paedophile ring
- 2 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 3 Sherlock series 3: Benedict Cumberbatch and Martin Freeman provide teasers for the biggest comeback in British television
- 4 A forgotten episode in Russian history leaves links with the Philippines
- 5 People will try to reduce Mandela to a lilting reggae tune about ‘love’. They will fail
- < Previous
- Next >
iJobs Money & Business
£80000 - £100000 per annum + benefits + bonus: Harrington Starr: Project Manag...
£50000 - £60000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£30000 - £40000 per annum + Bonus and Benefits: Harrington Starr: A global Con...
£150 - £250 per day: Cornwallis Elt : iPhone Rollout- Blackberry Enginee...