President Obama vowed Monday to stop $165 million in bonuses for executives at the troubled insurance giant American Insurance Group, calling these payments "an outrage to the taxpayers who are keeping this company afloat."
"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay."
New York Attorney General Andrew Cuomo issued a subpoena Monday afternoon to force AIG to name the employees slated to receive the lucrative payments after the company missed a 4 p.m. deadline to turn over that information voluntarily. Cuomo pledged to investigate whether these bonuses are fraudulent under state law, and demanded to know who in the company had authorized them.
"Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system," Cuomo wrote in a letter he sent to AIG's chief executive Edward Liddy.
AIG promised to answer the subpoena: "We are in ongoing contact with the Attorney General and will respond appropriately to the subpoena," a company spokeswoman said.
Outrage over bonuses at a firm now 80 percent owned by taxpayers thanks to a $170 billion government bailout reverberated from Capitol Hill to Main Street. Anger intensified over news that the millions of dollars in extra pay would go to the AIG business unit whose risky practices nearly destroyed the firm and led to the unprecedented infusion of taxpayer money.
"To reward people who created the problem? That's not what America's all about," said Sen. Charles Schumer, D-New York.
Liddy, in a Saturday letter to Treasury Secretary Timothy Geithner, said his firm's hands were tied over the bonuses, blaming contractual obligations signed before AIG had accepted bailout money. The next day, AIG detailed how some of the bailout money it had received went to help other major U.S. firms as well as foreign banks and municipalities. Among the firms given billions by AIG: Goldman Sachs ($12.9 billion); Merrill Lynch ($6.8 billion); Bank of America ($5.2 billion) and Citigroup ($2.3 billion).
Obama ordered Geithner to find a way to block the bonuses. However, some blamed the Treasury Department for failing to alter the bonus contracts before sending AIG money from taxpayers.
"They should have written into the contract that you don't give any bonuses to failed companies, particularly the unit that caused all the problems," said Rep. Carolyn Maloney, D-Manhattan.
Physician Jim Deming, from the small town of Tomah, Wisc., is visiting New York City for the St. Patrick's parade and said he was disgusted.
"The AIG bonuses are way out of line," he said. "Who in their right mind would do that?"