Obama tries to block AIG’s bonuses

UPDATED:

President Obama, seeking to quell anger from taxpayers whom he soon may have to ask to support another bailout, on Monday called for trying to block the $165 million in bonuses that American International Group paid to reward top executives even after taking billions of government bailout dollars.

Mr. Obama called the move an “outrage,” but administration officials spent hours Monday attempting to explain why Treasury Secretary Timothy F. Geithner gave AIG a new payout this month even though the bonuses had been on the books since last year.

At the same time, the Obama administration offered new help to community banks to get small-business loans flowing, saying the nation’s shops and restaurants will be the ones to lead the country out of the recession.

Joining the chorus of enraged Capitol Hill lawmakers, Mr. Obama said that given the “substantial sums” AIG has received in government bailout money - upward of $170 billion - he has directed Mr. Geithner to use the funds as “leverage” and to pursue “every single legal avenue” to get around contracts to block the bonuses.

He said AIG’s woes are “due to recklessness and greed,” and Sen. Charles E. Grassley, Iowa Republican, suggested that AIG executives should follow “the Japanese example” by publicly apologizing and “do one of two things: resign or commit suicide.” Grassley spokesman Casey Mills later told reporters that the senator “doesn’t want U.S. executives to do that,” but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.

“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” Mr. Obama said. “I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?”

A CBS News poll shows just 37 percent of Americans approve of government bailouts of banks and financial institutions, while 53 percent disapprove, the highest number CBS has found since it began the poll in December.

White House press secretary Robert Gibbs said Treasury is “looking through contracts to see what can be done to wrest these bonuses from their recipients,” but no one in the administration would promise that the executives would have to return the money.

Mr. Gibbs repeatedly told reporters that the bonuses were granted before the government created the Troubled Asset Relief Program and said it may be tough to call back the bonuses.

Instead, Mr. Obama may “change the rules of the road going forward,” Mr. Gibbs said. The president pointedly mentioned that AIG’s new chief executive, Edward Liddy, took over after the bonuses were put into place.

“We can’t change everything in the past,” he said. “We will do all that we can - the president has asked the administration to look and see what possible remedies there are. But we’re also focused on ensuring that the actions we take are consistent with changing the way we do business here in Washington.”

On March 2, the government gave AIG another $30 billion in bailout funds. AIG was scheduled to pay out $165 million in bonuses Monday, from about $450 million it plans to distribute to about 400 employees in its Financial Products division, according to Bloomberg News.

AIG commanded attention on both ends of Pennsylvania Avenue.

House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, said Congress should “re-examine” laws that allow the Federal Reserve Bank to lend money without congressional approval, as was the case with AIG’s initial $85 billion Treasury loan.

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