Londoners refuse to return their bonuses as row fizzles out
AIG is under pressure to reveal the names of the individuals who have not returned their bonuses – thought to be from the London unit - as Connecticut’s Attorney General Richard Blumenthal subpoenaed 14 current and former executives.
Andrew Cuomo, the New York Attorney General, is investigating whether or not AIG bonuses were paid fraudulently under New York law.
Cuomo praised the AIG executives who have paid back their bonuses for having “risen to the occasion” and said that he hoped to recoup about half of the bonuses paid to them.
The Times claimed Cuomo had confirmed that many, if not all, of those who have held on to their bonuses are based in London, where AIG’s financial products division has been held responsible for a large portion of the insurer’s spectacular losses.
The Guardian reported Cuomo’s statement under questioning: "We have a very aggressive theory about our jurisdiction but we don't have a theory that gets us to London.”
The Wall Street Journal reported that an internal AIG memo, dated last Friday, urged at least some bonuses be repaid claiming this would ensure the names of individuals remained secret. "To the extent that we meet certain participation targets, it is not expected that the names would be released, at all."
The article claimed there was a belief within the company that outrage over the payments would subside if enough staffers returned their bonuses.
Legislation to tax the bonuses at 90% is wavering as so much has already been repaid.
Blumenthal, who continues to take a hard line, issued a statement about the subpoenas saying: "We are in discussions with the company to set the terms and timing of witnesses' potential appearances before the Banks Committee. We are mindful of security and safety concerns, seeking to be responsive and responsible in addressing them. We cannot comment at this point on who may testify.
"If AIG fails to cooperate, we will take appropriate and aggressive action to enforce these lawful subpoenas. The public has a right to know facts relevant to bonuses made from taxpayer funds by a company that would not exist without a taxpayer bailout. This information is vital for lawmakers seeking to reform Connecticut banking, finance and other laws and regulations -- assuring stronger scrutiny and oversight -- to protect jobs and prevent irresponsible systemic risk.
"We will be reasonable, respecting the security and privacy concerns of individuals who may be involved."
Call for new powers
Timothy Geithner, the Treasury Secretary, called for new powers to take over and wind down failing financial companies after the government's troubled rescue of AIG. “As we have seen with AIG, distress at large, interconnected, non-depositary financial institutions can pose systemic risks just as distress at banks can,” Mr Geithner said.
If such powers had been available to his predecessor Hank Paulson last September, Mr Geithner argued, they could have been used to place AIG into receivership, making sure that creditors, including staff, took appropriate "haircuts", avoiding the current situation altogether.
Mr Geithner believes such powers should be vested in the Treasury, while Federal Reserve chairman Ben Bernanke, who was also appearing before the House Financial Services committee, suggested the Federal Deposit Insurance Corporation – which has responsibility for taking over failing banks – might be more appropriate.
