President Obama must be wondering what hit him. The Bush Administration left a time bomb behind and it has blown up in Obama’s face. And guess who is getting blamed? Obama of course!
The truth is that by the time Obama became President, the AIG “retention bonuses” were legally binding – approved by the Bush Administration. When Congress okayed AIG’s bailout billions, the bonus package was a done deal. While Geithner and Democratic Senator Chris Dodd are being blamed for creating a loophole that allowed payment of the most recent AIG bonus millions, the fact is that they were simply trying to protect the government from future lawsuits. Congress cannot pass retroactive legislation, therefore bonuses written into AIG contracts before the bailout legislation were considered legally binding.
For reasons that aren’t clear to me, the Obama Administration has not pointed this out in a way the public can understand. And public outrage is building against the new President and his Treasury Secretary – whipped up by Republicans eager for ammunition to discredit them.
The outrage is understandable, however. AIG, which is receiving between $152 billion and $163 billion (so far) in taxpayer bailout funds, arrogantly awarded $165 million in bonuses to executives who operated its financial services division – the very group that brought down the company and the global economy with it. During the final months of the Bush Administration, the U.S. Government pumped billions into AIG in the form of loans and equity investment. After Obama became President, the company came back for $30 billion more. By that time, American taxpayers were the majority shareholders in AIG.
Yet AIG has not mended its ways, the board of directors (who receive hundreds of thousands of dollars in compensation for their services) not only approved outrageous bonuses to incompetent and probably dishonest executives but also decided to sue the federal government to recover $306 million in back taxes, penalties and interest.
And AIG’s founder, Maurice “Hank” Greenberg, is suing the company for securities fraud, claiming he was misled about its derivatives contracts even though it was Greenberg himself who was responsible for creating the money-losing derivatives.
Now, the AIG board has decided to change the company’s name because of all the recent negative publicity. It will henceforth be known as AIU Holdings Ltd. Meanwhile, President Obama and Treasury Secretary Geithner are left to cope with the lingering stink of the AIG scandal – and the company’s continuing financial problems. You can bet that no matter what they do, their political opponenets will find some way to whip up public ourage against them.