Obama, AIG And The Economy
MELISSA BLOCK, host:
From NPR News this is ALL THINGS CONSIDERED. I'm Melissa Block.
MICHELE NORRIS, host:
And I'm Michele Norris.
What's become of chorus a public outrage got a new lead singer today, President Barack Obama. He asked his treasury secretary to see if there is a legal way to block struggling insurance giant AIG from paying tens of millions of dollars in executive bonuses.
President BARACK OBAMA: 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.
NORRIS: The president made those comments this morning at a White House event called to announce new help for small businesses. More on that in just a moment, but first, NPR's SCOTT HORSLEY joins us. And Scott, the president said that he was angry about the news of these AIG bonuses but is there anything he can actually do about them?
SCOTT HORSLEY (White House correspondent): Well, from a political point of view showcasing that anger is maybe his most important step. From a practical point of view, it's not clear he can do anything. You know, over the weekend we heard the administration officials saying look, these bonuses were contractually agreed to before the company's near collapsed last fall. They are written in stone, there's no way to undo them, to which the president has essentially said we will go back and look again. You know, someone pointed out, auto workers are being asked to re-negotiate contracts, mortgage lenders are being asked to re-negotiate contracts, why not AIG employees? Just a couple of weeks ago the government did extend another $30 billion in aid to AIG and that deal is still being finalized, so there might be some leverage there. The White House spokesman even suggested, today, that the AIG employees should think long and hard about whether to take the bonuses, sort of trying to guilt them into turning money down. But probably the most important thing that the president has done today is just to show that he understands and shares the public's anger over these bonuses, even he can't actually undue them.
NORRIS: Now the president also said this underscores the need for reform of the nation's financial regulations. AIG as an insurance company, did it fall outside of that network of regulations that govern banks.
HORSLEY: That's right. Unlike a bank which has FDIC insured deposits, AIG was not subject to that sort of regulation, even though, as this episode has demonstrated, it's tentacles go just as deep into the financial system and it poses just as much risk to that system. So one of the principles that the president and law makers here are working on as they try to draft new regulations, is that any company with that sort of influence, that poses that sort of systemic risk, should be subject to more government oversight because the alternative is a very shaky financial system and that jeopardizes the credit that the economy, and now our economic recovery, depend on.
NORRIS: Scott, I want to just turn to the meeting there at the White House today, about small businesses. The president also outlined plans to make credit easier for small businesses. How does he propose to do that with credit as tight as it is?
HORSLEY: He wants to take $15 billion from the bank rescue fund to basically bankroll small business loans made through the SBA. He wants to temporarily waive the fees that borrowers are changed and offer a bigger government guarantee on those SBA loans to encourage banks to make more of them. He points out that small businesses have been a big job generator over the last decade -about seven out of ten jobs - and so, in essence it's important to help those businesses and also to show that the bank rescue efforts are not just about help the Wall Street.
NORRIS: That's NPR SCOTT HORSLEY. Scott thanks so much.
HORSLEY: My pleasure Michele.
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