Word: aig
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...balance of the federal government does, at least when it comes to fixing broken markets. Since the Treasury's policies are based on the whims of the Secretary, what Geithner is really saying is that he and he alone has the intellect and background to prevent future failures like AIG from happening again...
...Less than two weeks ago, The Washington Post published an article announcing that AIG had paid millions of dollars in retention bonuses to executives of the company. Documents later turned over to the Connecticut Attorney General show that the actual figure was $218 million. To date, the government has loaned AIG $170 billion from various financial assistance efforts, including Troubled Asset Relief Program ("TARP"), in exchange for an 80 percent stake in the company. However, in apparent disregard of its unmatched failure, AIG chose to honor its employee's compensation agreements, and awarded multi-million dollar bonus to its executives...
...Edward Libby, AIG's government appointed CEO, has argued that these were retention bonuses, contractually guaranteed to employees who remained with the company. It has been further argued, on his behalf, that the bonuses are exempted by the American Recovery and Reinvestment Act, which provides that restrictions on bonuses do not apply to those made under an employment contract executed before February 11, 2009. The public seems unwilling to consider his arguments...
...Last year AIG admitted that the company's Financial Products division entered into credit default swap agreements with banks that bought and securitized loans. CDS are a financial instrument that mimics the characteristics of an insurance contract. These instruments were most exposed to risk when the securitization market blew up following the housing market collapse. Not only is the company almost entirely owned by the government, but many of the executives receiving the bonuses are the same executives that marketed the CDS agreements that caused its downfall. (Read "Treasury Learned of AIG Bonuses Earlier Than Claimed...
...Some of AIG's payouts were retention bonuses, the latest tin-eared act of the large insurance company. In light of the injury AIG caused the economy and the debt it owes to the government, many see these actions as an abnegation of the company's duty to reasonably compensate their employees. Responding to the public's outcry about the AIG compensation disclosure, members of the House and Senate, along with the Treasury Department, have proposed a motley mix of measures seeking to counteract these bonuses...