US Treasury penalises AIG over bonus payments

by Gill Montia

Story link: US Treasury penalises AIG over bonus payments

American International Group (AIG) is being penalised by the US Treasury for its insistence that it is contractually obliged to pay huge bonuses to staff, some of whom played a part in the spectacular demise of the insurance company.

The US Treasury says it will be deducting $165 million from AIG’s latest rescue package in lieu of bonus payments that the company insists it must honour.

Secretary for the Treasury, Timothy Geithner, is also reported to be working with the US Department of Justice to see if bonuses that have been paid can be clawed back.

AIG is now majority owned by the US Government and Mr Geithner has confirmed that efforts to resolve the future status of the group continue apace.

He has also spoken in defence of AIG’s chief executive, Edward Liddy, who took up his post last year at the request of the US Government and apparently had little power to curb the bonus payments.

However, future bonus payments by AIG will be subject to new limits once legislation relating to bailed-out financial institutions is in place.

Earlier this month the stricken insurer reported the largest quarterly loss in US corporate history, at $61.7 billion for the three months to the end of December.

The group posted a net loss of $99.3 billion for the whole of 2008, compared with a net profit of $6.2 billion in 2007.