President Barack Obama speaks about AIG bonus payments as he makes remarks to small business owners, community lenders and members of Congress, Monday, March 16, 2009, in the East Room of the White House in Washington.
President Barack Obama speaks about AIG bonus payments as he makes remarks to small business owners, community lenders and members of Congress, Monday, March 16, 2009, in the East Room of the White House in Washington.

WASHINGTON –

Joining a wave of public anger, President Barack Obama blistered insurance giant AIG for “recklessness and greed” Monday and pledged to try to block it from handing its executives $165 million in bonuses after taking billions in federal bailout money.

“How do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama asked. “This isn’t just a matter of dollars and cents. It’s about our fundamental values.”

Obama aggressively joined other officials in criticizing American International Group, the company that is fast becoming the poster boy for Americans’ bailout blues.

The bonuses could contribute to a backlash against Washington that would make it tougher for Obama to ask Congress for more bailout help â and jeopardize other parts of the recovery agenda that is dominating the start of his presidency. Thus, the president and his top aides were working hard to distance themselves from the insurer’s conduct, to contain possible political damage and to try to bolster public confidence in his administration’s handling of the broader economic rescue effort.

David Axelrod, senior adviser to Obama, said in an interview with The Associated Press that there was no question that the bonuses and the public’s anger over them could run many things off the rail. “People are angry because they’ve seen exhibit after exhibit of irresponsibility and people walking away with money in their pockets,” he said. “It’s undermined the discussion that we have to have.”

Obama had scheduled a speech Monday to announce new help for recession-pounded small businesses. But first, he said, he had a few words to say about AIG. He lost his voice at one point and ad-libbed, “Excuse me, I’m choked up with anger here.” It was just a light aside, but he meant the sternness of his remarks to come through.

“This is a corporation that finds itself in financial distress due to recklessness and greed,” Obama declared.

He said he had directed Treasury Secretary Timothy Geithner to “pursue every legal avenue to block these bonuses and make the American taxpayer whole.”

Later, White House spokesman Robert Gibbs said the administration would modify the terms of a pending $30 billion bailout installment for AIG to at least recoup the $165 million the bonuses represent. That wouldn’t rescind the bonuses, just require AIG to account for them differently.

Axelrod called the bonuses “spectacularly tone-deaf.”

He said the administration hoped the tough talk would result in voluntary action on the part of AIG and its bonus recipients, although that remains an open question. “All we can do is administer this thing going forward,” he said.

On a separate track, New York Attorney General Andrew Cuomo said Monday he would issue subpoenas for information on the bonuses after AIG missed his deadline for providing details. Cuomo said his office would investigate whether the employees were involved in AIG’s near-collapse and whether the $165 million in bonus payments were fraudulent under state law.

AIG spokeswoman Christina Pretto told The Associated Press, “We are in contact with the attorney general and will of course respond to his request.”

One reason that the AIG bonus giveaway is such a compelling story â and a politically troubling one for Obama if not neutralized â is that it offers a simple story line that appears to sum up ways in which the federal bailouts have gone awry.

“This is just the kind of issue that galvanizes public outrage,” said Paul C. Light, professor of public service at New York University. “It’s always the tangible stuff, the things that ordinary Americans can relate to.”

Bailout steps for AIG totaling over $170 billion since September have effectively left the federal government with an 80 percent stake in the faltering insurance giant.

Obama’s comments came on the same day a new poll showed slippage in his approval rating. The poll by the Pew Research Center showed it dropped from 64 percent in February to 59 percent this month amid divisions of opinions over his economic proposals and what the pollsters said was a growing perception that the president is listening more to his party’s liberals than to its moderates.

Still, those surveyed generally gave the president favorable marks for doing as much as he can to try to fix the economy, and few blame him for making the economy worse.

Andrew Kohut, Pew’s director, said in an interview that people are most angry with banks and companies but there’s also “pushback against Washington generally. And, of course, the buck stops with Barack Obama these days.”

Obama’s sharp words continued an insistent administration drumbeat over the past few days designed to pressure the bonus recipients to forgo them. Thus far, American International Group officials have refused to rescind the payments.

In a letter to Geithner over the weekend, the government-appointed chief executive of AIG, Edward Liddy, said the bonuses were legally binding obligations and the firm’s “hands are tied.”

Still, pressure was building on that issue â and on the government to rework its AIG bailout to make sure the company repays as much of the $170 billion as possible.

So far, the company has been honoring its contracts with U.S. and foreign banks, paying out more than $90 billion in economic bailout funds to big banks and others. The government agreed to uphold those contracts when it seized control of AIG in September, contending that failure would bring even worse global economic problems.

However, Obama officials made the rounds of Sunday talk shows to denounce the insurer. And even Federal Reserve Chairman Ben Bernanke weighed in, saying on CBS’ “60 Minutes” that the AIG bailout angered him the most and that he “slammed the phone more than a few times on discussing AIG.” Still, he said a collapse of AIG would have wreaked havoc on the global economy.

Obama was planning an appearance later in the week on Jay Leno’s NBC talk show, perhaps to add a lighter touch to his efforts to show himself in command of efforts to resuscitate the economy.

The AIG bonuses were revealed over the weekend. It also was disclosed that AIG used $90 billion-plus in federal aid to pay foreign and domestic banks, some of which had received their own multibillion-dollar U.S. government bailouts.

The recipients included Goldman Sachs, at $12.9 billion, and three European banks â France’s Societe Generale at $11.9 billion, Germany’s Deutsche Bank at $11.8 billion, and Britain’s Barclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans and which is now part of Bank of America, had received $6.8 billion as of Dec. 31.

The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.

Outcries against the company have also come from congressional leaders.

Archived comments

Paulson and Bush would have done nothing.In fact they did nothing except give them the money.

thesurfrider

3/16/2009 7:27:35 PM

Just a way to distract public attention from the big picture “oh never mind the Billions, look at these guys with bonuses”

$165 million in bonuses compared to over $170 billion in “bail out” money is nothing..

It is like giving them a Ferrari and saying taking away the cup holder will punish them.

sidd

3/16/2009 7:43:59 PM

Difficult to fathom…

wiseone

3/16/2009 7:50:15 PM

of course, if we let companies file for bankruptcy or go out of business, these types of contractual obligations are nullified, but that was soooooooo the 1990’s.

bouldermeister

3/16/2009 7:51:33 PM

..It is like giving them a Ferrari and saying taking away the cup holder will punish them.

Sidd you missed it eh?

thesurfrider

3/16/2009 7:58:10 PM

Obama’s “Anger” is all a facade.

Tuesday, November 25, 2008: “It was Mr. Geithner, not Mr. Paulson, for example, who put together the original rescue plan for the American International Group”

http://query.nytimes.com/gst/fullpage.html?res=9D04E5DD133DF936A15752C1A96E9C8B63&sec=&spon=&pagewanted=all

O

bouldermeister

3/16/2009 8:04:27 PM

A man walks into a bank, places a bomb and ask for 1 million. He gets his money and leaves the bomb behind. The police arrives and has no idea how to deactivate the bomb, so they ask the man (nicely) to stay around, deactivate the bomb and he agrees for a fee of another million. Sounds familiar?

It is not the size of the bonuses and how they compared with the 170 billion AIG has blown so far. It is that the UAW is asked to renegotiate, it is companies paying pennies on the dollar for bonds. All this while out there the “Believe in Change” administration is acting as an eunuch around this issue.

Yes, we are a country of laws and you can not just abrogate a contract. At the same time, we are a country of negotiators and when you own 80% of the company, you have the power to say, “listen, you will voluntary forgo your contract, or we will spin off the good part, declare bankrupt the bad part and you can step in line with all other creditors for your bonuses to plead your case with the judge.”

jgarcia@ucar.edu

3/16/2009 8:41:37 PM

or you just let them fail and let healthy companies gobble up whatever they think has worth.

bouldermeister

3/16/2009 8:47:46 PM

Posted by thesurfrider

“Sidd you missed it eh?”

_______________________________

Yeah I missed the part about AIG being political contributors and I missed the part about all the politicians getting huge piles of pork out of the Multi Billion-Dollar “Bail Out” deal.

I also missed the part about how the people voted NO on the Muti-Billion Dollar bail out (that our grandkids will be trying to pay off) but it was railroaded through anyway by a corrupt rigged system.

But never mind that the guys with bonuses are Bad and I and mad because they are bad.

Thanks Obama for trying to punish them, that was the change I could believe in.

bhaaabhaaa.

sidd

3/16/2009 8:55:03 PM

Obama’s approval rating:59% !!!Unless of course you live in the peoples republic where everyone is still dancing in the streets!what a freakin joke!The market’s confidence in his tactics are quite obvious at this point, there is no confidence. Period. What a great leader he has been so far, as he signs bills giving out bundles of taxpayer money, then slams the company he’s giving the money to?His true hollywood side is revealing it’s ugly head with some gray hair to boot.

bison

3/16/2009 9:15:17 PM

So odd that AIG feels “contractually obligated” to pay the bonuses BUT didn’t feel “contractually obligated” to fulfill it’s duty to stockholders. Obviously they pick which contractual obligations they will fulfill-and which moral ones.

WHEN ARE THESE FRAUDULENT JERKS GOING TO GO TO JAIL? One way to prevent the bonuses from being paid is to indite them….tie it up in court for years.

Flyonthewall

3/16/2009 9:19:25 PM

Tired of the federal government wasting your money?

Easy solution…

Stop paying taxes.

Unless that is, you LIKE the federal government wasting your money…

TurboPotato

3/17/2009 6:25:09 AM

How’s this any worse than the $33M the Kennedy’s are receiving to preserve their legacy?

john_notbush@yahoo.com

3/17/2009 7:06:58 AM

Obama’s just trying to divert attention from the fact that it was his (and his staff’s) screw up in the first place.They could have easily limited/excluded bonuses in their draft of the bail out.But they forgot, I guess.Probably because they’re a bunch of smirky novices whose preferred public tone of voice is sarcasm and snark.

And anyway, I read that the average bonus was just $500,000.You try living on that in New York City after taxes, especially if you have a family.It’s not that much money when you put it in context.

ThatCertainWoman

3/17/2009 7:50:03 AM

There were $8 billion of earmarks in the last spending package Mr. Obama just signed.Maybe he should focus more on the billions and less on the millions.

gsegiet@flash.net

3/17/2009 8:26:43 AM

I’d bet the 25 cents left in my pocket that the employment contracts stipulate that these are “guaranteed” bonuses and therefore treated as income by not only the bank, the employee who received them, and the IRS. I’m less concerned about the amount and mulitiplicity of the bonuses and more concerned on how those bonuses were taxed – at the bonus rate or did they play with the tax frequency on them?

MountainHaven

3/17/2009 8:52:40 AM

Numerically, the bonuses may represent only a fraction of a percent. Symbolically, though, they’re huge beyond measure. Bonuses are a reward. For what? These are the people who caused the problem. Don’t reward them, throw ’em out.

DeepThroat

3/17/2009 9:30:00 AM

Amid AIG Furor, Dodd Tries to Undo Bonus Protections He Put In:

That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009”

Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100

http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig—time/

bouldermeister

3/17/2009 9:53:47 AM

What makes this story so ridiculous is the apparently sincere outrage expressed by politicians on BOTH sides of the aisle at the idea that $165 million in taxpayers’ money may have been wasted. Oh, the irony! If only Congress could muster similar fury at its own waste of sums orders of magnitude greater.

To take just one obvious example, the earmarks in the Democrats’ $410 billion omnibus spending bill alone–forget about the waste that is shot through the whole $410 billion–added up to something like $8 billion. That’s almost 50 times the AIG bonuses. It would be impossible to calculate with any precision the amount of waste in the federal government’s $4 trillion budget, which works out to around $11 billion a day, but it’s safe to say that Congress wastes more than $165 million every morning before breakfast.

So it would be nice if Congress’ new-found concern with wasteful spending could be directed at its own appropriations.

JT

3/17/2009 10:26:59 AM

MountainHaven:

The bonuses are taxed at the individual’s highest marginal tax rate for income, i.e., 35% or whatever the applicable marginal tax rate is for that particular individual. There are no tax breaks associated with compensation, including bonuses as contemplated here (other than standard Schedule A deductions such as mortgage interest, etc.).

JT

3/17/2009 10:30:14 AM

I stand corrected: Reid just proposed a special tax provision that would tax “certainly almost all” of the bonuses received, thereby appropriating the bonus money away from the individuals who receive them and back into the Treasury’s coffers:

http://www.cnn.com/2009/POLITICS/03/17/aig.bonuses/index.html

JT

3/17/2009 10:34:11 AM

Insured with AIG? Know someone who is? Drop them, and have anyone you know who uses them drop them. The American public and American business needs to boycott AIG. Let’s put AIG out of business!

Danimal

3/17/2009 11:03:40 AM

Danimal,

You put AIG out of business and we will NEVER get our money back.

Dunkterfunk

3/17/2009 2:56:00 PM

We (the taxpayers) own AIG now, so ignore Danimal’s advice and buy only from AIG!!

JT

3/17/2009 3:08:29 PM

Anyone else see Gibb’s press conference today? It was painful. At one point the questioner was trying to answer the old who knew what when question.

He said…and I quote, to the best of my recollection:

“I don’t have a ticky tocky so I really can’t answer that question..”

They are exposing their incompetence with every new initiative.

SoldierInWarofIdeas

3/17/2009 5:15:12 PM

How can these execs deserve bonuses? Give us the bailout money back, AIG.

rocknwsc

3/17/2009 7:57:05 PM

Seems this was not such a surprise as all the “outrage” would suggest:

http://news.yahoo.com/s/ap/20090318/ap_on_go_pr_wh/aig_what_did_they_know;_ylt=Ari3vIF_ZcgZyjlXIswhJlus0NUE;_ylu=X3oDMTJobjluZmhjBGFzc2V0A2FwLzIwMDkwMzE4L2FpZ193aGF0X2RpZF90aGV5X2tub3cEcG9zAzIwBHNlYwN5bl90b3Bfc3RvcnkEc2xrA3dhc2hpbmd0b25rbg–

Washington knew AIG was preparing to pay bonuses

WASHINGTON â Cue the outrage. For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn’t until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back.

walongloop

3/17/2009 8:16:42 PM