US’ Geithner says bank fee can recoup AIG bonuses
By David Lawder
WASHINGTON, Feb 3 (Reuters) – U.S. Treasury Secretary Timothy Geithner on Wednesday said insurer AIG’s contracts to pay hundreds of millions of dollars in bonuses were “outrageous” and appealed to Congress to help recoup the payments.
Geithner said Congress could help recover the “deeply irresponsible” bonuses by passing an Obama administration proposal to levy fees on large financial firms.
“Those contracts were outrageous. They should never have been permitted,” Geithner said in testimony to the U.S. House of Representatives Ways and Means Committee.
Obama has proposed a fee on the largest financial companies to collect around $90 billion over 10 years to recoup taxpayer losses resulting from financial bailouts.
The White House has shifted to a more aggressive stance on Wall Street since the Democrats lost a Senate seat in a special election in Massachusetts in January. The election highlighted voter resentment against big banks and big bonuses in the wake of massive bailouts during the financial crisis.
American International Group Inc is readying another round of payments to employees of its Financial Products unit — largely blamed for making bad bets on credit default swaps that brought the firm to the brink of collapse — that are expected to reach about $100 million.
AIG said late on Tuesday that these employees had agreed to reduce their bonuses by about $20 million, short of a $26 million target. The payments were part of a second round of $195 million in bonuses paid by AIG after $165 million in payments sparked outrage in March 2009.
“Now, if you join with us in passing this proposed fee on our largest financial institutions, then you’ll be able to say, as we do, that the American taxpayer will not pay a penny for what happened at AIG,” Geithner said.
With Democrats at risk of seeing their big majority in Congress eroded in November’s elections, lawmakers have been increasingly critical of Obama administration policies that some say have favored Wall Street over job growth and struggling homeowners.
Geithner, who was grilled last week by a House panel over his role in the AIG bailout when he headed the New York Federal Reserve, took a bit more criticism on Capitol Hill over the insurer.
“The administration’s handling of AIG represents the Keystone Cops”, said Rep. Kevin Brady, a Texas Republican.
The Obama administration currently estimates taxpayer losses from the Troubled Asset Relief Program at about $117 billion — a figure expected to decline as recovery takes hold. The largest losses are attributable to rescues of automakers and AIG as well as mortgage modifications.
AIG BONUS MANEUVERING
Geithner also praised the work being done by Kenneth Feinberg, the Treasury’s executive pay czar, to negotiate the payments lower, calling Feinberg “a brave, smart, tough man”
Feinberg said earlier on ABC’s “Good Morning America” program that the AIG bonuses, which were “grandfathered” into contracts signed by the insurer in late 2007 and early 2008, would end this March.
The Treasury’s compensation “special master” denied an accusation by Sen. Charles Grassley, an Iowa Republican, that the Obama administration was “outmaneuvered” by AIG.
“What I’m trying to do now is maximize whatever leverage we have to get as much of that money back and — to use Senator Grassley’s word — to maneuver AIG to pay back what it said it would pay back.”
(Reporting by David Lawder; Editing by Andrew Hay) ((firstname.lastname@example.org; +1 202 898 8395; Reuters Messaging: email@example.com))
Keywords: USA GEITHNER/AIG