Oh, AIG. Go sit in the corner. Again. Preferably without a masseuse and a glass of taxpayer-afforded lemon-infused mineral water.
AIG first upset American taxpayers and Barack Obama when the failing company decided to treat its employees to a posh spa weekend the day after it received $85 billion of taxpayer-funded federal bailout money. At the time the campaigning Obama brought up this misuse of taxpayer money in the debates, noting that these executives should be fired and that the cost of the trip should be reimbursed to the Treasury.
Despite assurances by now-President Obama that the $787 billion stimulus package would be free of pork barrel spending and special-interest earmarks, and despite his assurances that executives in bailed-out companies wouldn’t be rewarded for failure, the stimulus package was signed into law with an executive compensation amendment tacked on by (the newly-outraged) Chris Dodd. Dodd had clashed with the President on the issue of executive compensation after Obama announced his executive salary cap; but news of Dodd’s amendment and AIG’s embodiment of it has caused a massive public outcry, and Dodd is now looking at ways to tax the bonuses.
Dodd’s stimulus package amendment allows for contractually obligated bonuses agreed on before Feb. 11, 2009. This means AIG was able to spend $165M in bonuses for top executives – including 11 top execs who took their $1 million+ “retention bonuses” and walked out the door with them.
How this amendment escaped the notice of the President, the Treasury Secretary and members of Congress who are outraged by this news is a good question. The simple answer is most likely that giving people less than 24 hours to read a complicated 1100 page spending bill is just not enough time for anyone to read and understand it, even the guy sitting in the Oval Office. Perhaps a Cliff’s Notes version would have been of value…
Obama and other members of Congress are predictably outraged, and the President has instructed Treasury Secretary Timothy Geithner to “pursue every single legal avenue” to undo the bonuses. Geithner is now saying that the $165 million will be deducted from the $30 billion that the company is due to receive as part of their bailout package. But this solution doesn’t work for people who want those that recieved the bonuses to have some sort of personal accountability in the matter, hence certain members of Congress looking for ways to tax the bonuses up to 98%.
If only it were that easy…