Obama, Cuomo Target AIG Bonuses President Obama is asking Treasury Secretary Timothy Geithner to block retention bonuses planned by AIG — and New York Attorney General Andrew Cuomo is also taking a hard look at the plan.
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Obama, Cuomo Target AIG Bonuses

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Obama, Cuomo Target AIG Bonuses

Obama, Cuomo Target AIG Bonuses

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MICHELE NORRIS, host:

The president wasn't the only one speaking out against the AIG bonuses today. New York attorney general Andrew Cuomo threatened to subpoena the company if it doesn't release details about the pay out. He wants names and job titles of all those who are getting bonus money. AIG officials say they understand the outrage but are contractually obligated to pay the money. NPR's JIM ZARROLI reports.

JIM ZARROLI(Reporter, Business, New York): A lot of people are already unhappy about the federal bank bailout and so the news this weekend that AIG was paying bonuses to employees of it's financial products division amounted to pouring gasoline on a fire. At an outdoor shopping plaza in Kansas City it was hard to find anyone who like what they heard about the bonuses.

Mr. JOHNNY HALL(ph): No, no bonus. They shouldn't have got nothing. They should have got some jail time, you know, something.

Ms. LINDSEY KING(ph): Why, if they lost all this money, are they now giving rewarded for having messed up? Because most people would probably get fired for doing a similar thing.

Mr. ROYCE WITTY(ph): The people involved ought to recognize the fact that they're bleeding the company and that it's more of a moral issue than it is a legal issue, and that they should also understand that it's absurd to have that kind of bonus.

ZARROLI: That was Johnny Hall, Lindsey King and Royce Witty. The money paid by AIG was in the form of retention bonuses. James Rhida(ph) an executive compensation consultant says these bonuses are paid by companies as a way of keeping valued employees, and until not long ago they were common on Wall Street.

Mr. JAMES RHIDA (Executive Compensation Consultant): In 2008 when these were put in place, they were pretty much standard, because there was lot of movement between the companies and even between cities.

ZARROLI: AIG decided to pay the bonuses a year ago to more then 400 employees of it's small financial products division. This was the same division that created a lot of the complex financial products that later led to the companies meltdown and take over by the federal government. But AIG spokesman Nick Ashooh says, at the time, the company still thought it could fix the divisions problems.

Mr. NICK ASHOOH (Spokesperson, AIG): The fear was that the people who know these contracts and know the systems with financial products would walk out the door and leave AIG with, you know, almost $3 trillion of notional value of derivatives that near to be unwound.

ZARROLI: Ashooh says that when new CEO Edward Liddy came in and saw how big the bonuses were, he was disturbed, and many people inside AIG's other divisions shared his anger.

Mr. ASHOOH: A lot of people inside AIG are pretty upset about it. I mean, imagine, most of these people are employees who are working in very good businesses and had nothing to do with this problem and they're paying substantial penalty, financially, and taking a fair amount of abuse as well.

ZARROLI: But the company says it's being told by its lawyers that it's legally obligated to pay the bonuses. AIG officials say they are taking steps to mitigate the damage to the company's bottom line by reducing the salaries of the 25 highest paid employees to a dollar a year. And they say they will restructure the bonuses for some of the company's top executives. But James Rhida says the company should have tried harder to get out paying the bonuses.

Mr. RHIDA: Well, I think that you could negotiate anything, you know, certainly. And also what that tells me is that perhaps AIG should go bankrupt, because a bankruptcy judge could, in fact, dissolve those agreements.

ZARROLI: But the federal government was worried that letting AIG go bankrupt would set off a chain reaction of losses throughout the financial markets, and so it engineered the bailout last September as a way of keeping the company solvent. As a result, some 80 percent of AIG is now owned by U.S. taxpayers who appear to have little choice but to meet the company's financial obligations. But if contracts can be broken by public anger and political pressure, then AIG may get out of paying the bonuses, after all.

Jim Zarroli, NPR News, New York.

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