Pressure grows on AIG to return bonuses

Speculation over Geithner's future
"I don't know if he should resign over this," said Sen. Richard Shelby, R-Ala. "He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this."

The administration quickly moved to quash talk of Geithner's ouster. White House spokesman Robert Gibbs said Obama retains full confidence in his treasury secretary.

There was a daylong rush to the microphones on Capitol Hill — a bipartisan campaign to out-outrage each other.

Sen. Chuck Grassley, R-Iowa, led the stampede with a statement Monday night on a radio show that AIG executives should either return the money or commit suicide in what he described as the Japanese style of taking responsibility. He spent much of Tuesday backtracking but still calling for corporate titans to take responsibility for grievous errors in judgment.

Other Republicans said Democratic leaders last month killed a plan that would have forced financial institutions to compensate taxpayers if they paid their executives large bonuses after receiving federal bailout money.

Sen. Olympia Snowe, R-Maine, a co-sponsor of the amendment to Obama's stimulus bill, said striking it "left open an escape hatch of golden parachutes for top executives on Wall Street."

Not the only company to hand out bonuses
AIG has received more than $170 billion from U.S. taxpayers. With bailouts in hand, AIG has paid out tens of billions of dollars to banks, municipal governments and other financial institutions around the world.

AIG is no stranger to controversy, nor is it the only publicly rescued company to give bonuses while being bailed out of financial ruin.

Merrill Lynch paid $3.6 billion in bonuses to its executives while its sale to Bank of America Corp., a big recipient of bailout money, was pending.

Morgan Stanley also came under fire Tuesday. Sen. Robert Menendez, D-N.J., urged Geithner to halt retention awards planned by the company's joint brokerage venture with Citigroup. Both firms have received billions of dollars in government bailout funds. Morgan Stanley is reportedly planning to pay its brokers up to $3 billion in retention payments — a spokeswoman said the program amounts to a nine-year loan — to keep them from jumping to other firms.

Cuomo said AIG last week paid bonuses of $1 million or more to 73 employees, including 11 who no longer work there. Despite their company contracts, the AIG employees agreed to take 2009 salaries of $1 in exchange for receiving their bonus packages, he said. And he said the fact that AIG could negotiate the terms of the payments "flies in the face of AIG's assertion" that it had no choice but to make the contractual bonus payments.

Video   Congress plays good cop, bad cop with AIG March 17: Congress sent a stern letter to AIG Tuesday asking the company to simply cancel bonuses while more aggressive legislation was being written to take the money back. NBC's Kelly O'Donnell reports. Nightly News

Administration officials said Geithner did all that he legally could to avert the payments.

Geithner urged AIG chief executive Edward Liddy last week to renegotiate the contracts that called for the bonuses.

"He recognized that you can't just abrogate contracts willy-nilly, but he moved to do what could be done," Larry Summers, Obama's chief economic adviser, told The Associated Press in an interview Tuesday.

Impose a 100 percent tax on the bonuses?
Though AIG's bonus plans were disclosed last year, Congress' outrage and threats have begun pouring forth only recently.

At least three Democratic bills and one Republican measure were introduced to crack down on the Treasury Department and stiffen rules for recipients of bailout funds. Two bills in the House aimed to impose a 100 percent tax on the bonuses.

In the Senate, the top two members of the Senate Finance Committee — a Republican and Democrat — announced a proposal to impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them.

The Internal Revenue Service currently withholds 25 percent from bonuses less than $1 million and 35 percent for bonuses more than $1 million.

The Obama administration said it was trying to put strict limits on how future government bailout dollars could be used, and Reid on Tuesday said he urged the administration to step up its pace on that.

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