Yesterday the story broke about AIG paying $165 million in bonuses to people in the financial division that ruined the company, and naturally the response from the American public was not positive. Americans expressed their anger through the media, and it was a unanimous response of disgust and outrage. Now a U.S. Senator expressed his feelings by going on the radio and telling the executives at AIG to resign or commit suicide. For more on this, read the following article from HousingWire.
We can’t make this stuff up. Outrage over $165 million in bonus payments paid to traders for the bailed out American International Group, Inc. (AIG: 0.931 +12.17%) reached a boiling point with the White House and lawmakers yesterday — but the most over-the-top statement came courtesy of Sen. Charles Grassley (R-IA), who said that executives at the troubled insurer should resign or kill themselves.
In a comment aired on WMT, an Iowa radio station, Grassley said the following: “The first thing that would make me feel a little bit better towards them if they’d follow the Japanese model and come before the American people and take that deep bow and say ‘I’m sorry,’ and then either do one of two things: resign, or go commit suicide.”
Grassley’s camp was sent into damage control mode immediately, with spokesperson Jill Gerber saying that “clearly he was speaking rhetorically,” according to a report published at POLITICO.
“Point being, U.S. corporate executives are unapologetic about running their companies adrift, accepting billions of tax dollars to help, and then spending those tax dollars on travel, huge bonuses, etc,” she told the news service.
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Of course, Grassley wasn’t the only lawmaker or government official livid at news of the bonuses yesterday. President Obama weighed in on the matter, as well, with the White House saying it would seek to block the bonus payments. Obama himself said it was “hard to understand” how a company kept afloat at the expense of the U.S. taxpayer was doling out hundreds of millions in bonuses to employees.
“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama said.
“In the last six months, AIG has received substantial sums from the U.S. Treasury, and I’ve asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.
“I want — I want everybody to be clear that Secretary Geithner has been on the case.”
Oh, good. Geithner’s on the case. We can all rest easy now. Obama did note in his speech that he felt regulatory reach was lacking in the case of non-bank financial institutions, such as AIG, and that lack of reach was limited the U.S. government’s power to control the insurer’s actions.
AIG isn’t alone here, according to a Friday report in the Wall Street Journal, which said that officials at Morgan Stanley (MS: 22.53 -2.21%) and Citigroup, Inc. (C: 2.50 +7.30%) were looking at ways to get around tough new federal regulations on compensation. Part of those plans include increasing base salaries for top executives, the newspaper reported.
“The trend is to increase the base pay in light of the reduced bonuses,” Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, told the WSJ, who said the firms wouldn’t be able to survive without paying top performers.
Bottom line: look for the debate over compensation at key financial firms to intensify in coming weeks.
This article has been reposted from HousingWire. View the article on HousingWire’s mortgage finance news website here.