U.S. President Barack Obama announced Monday he will "pursue every legal avenue" to block American International Group from paying out millions in executive bonuses after taking federal government bailout funds.
The insurance giant intends to pay out US$165 million to executives -- bonuses that may not have been paid out at all, if the federal government hadn't provided bailout money to keep AIG alive.
Obama said he has asked Treasury Secretary Timothy Geithner to do everything possible to stop the bonuses, saying AIG is in financial difficulties due to a culture of "recklessness and greed."
He said AIG has received "substantial sums" from the federal government in recent months, and Geithner will use that as leverage to try to convince AIG to cancel the payments, Obama said.
"This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," he said.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?"
In a separate statement, New York State Attorney General Andrew Cuomo demanded that AIG provide him with details about which company executives are set to receive the bonuses.
"We have requested the list of individuals who are to receive payments under this retention plan, as well as their positions at the firm, and it is surprising that you have yet to provide this information," Cuomo said in a letter to AIG chief executive Edward Liddy. "Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system."
Cuomo said he will investigate whether any bonus recipients are responsible for the company's decline and whether the bonuses are fraudulent under state law.
Cuomo indicated that he will issue subpoenas at 4 p.m. Monday if he did not receive a list of employees, including information about the nature of their work and their employment contracts.
Whether AIG's complied with the demand was not immediately known after the deadline passed.
The payouts were due by Sunday as part of a total payout reported to be around the US$450 million mark.
Washington has paid out at least US$170 billion to AIG.
The company reported recently that it lost US$61.7 billion in the fourth quarter of 2008 -- the largest corporate loss in history.
Cuomo also disclosed on Monday that he has been investigating compensation agreements of AIG employees since last fall.
Meanwhile, Obama voiced his outrage regarding the AIG bonuses during an announcement at the White House about new steps the government is taking to help credit flow to small businesses suffering from the recession.
He said small business owners have been forced to tighten their belts, take pay cuts and fight to keep credit lines open in order to stay in business -- without the benefit of government bailouts.
"All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. That is an ethic that we have to demand," Obama said.
