US President Barack Obama Monday said multi-million-dollar bonuses planned for executives and traders at bailed-out insurance giant AIG were an “outrage” and vowed to pursue a clampdown.
“This is a corporation that finds itself in financial distress due to recklessness and greed,” he said in prepared remarks at the White House.
“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less 165 million dollars in extra pay,” Obama said, after details of the payouts emerged over the weekend.
“How do they justify this outrage to the taxpayers who are keeping the company afloat?”
On Sunday, administration officials said there was little that Treasury Secretary Timothy Geithner could do legally to stop the bonuses, because they were promised under AIG employment contracts before the insurer was bailed out.
But Obama, noting the substantial government support extended to AIG, said: “I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole.”
Massive losses at a London trading division have forced the US government to pump some 150 billion dollars into the crippled American International Group. On March 2, it unveiled another emergency injection of 30 billion dollars.
AIG was deemed by the US government to be too big to fail, given the intricate web of ties it built with other financial institutions after underwriting their riskier investments in the tanking property market.
Obama said that underlined the need for new financial regulation “so we don’t find ourselves in this position again.”
He called for “some form of resolution mechanism in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial system in cases such as this.”
“We will work with Congress to that end.”
The president, conscious of the potential for a public backlash as his administration readies new support for the banking industry, added that the controversy at AIG “isn’t just a matter of dollars and cents.”
“It’s about our fundamental values,” he said.
“All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multi-million-dollar bonuses.
“And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. That is an ethic we must demand.”
AFP
