Scandal used to win support for bank tax on profits
US Treasury secretary Tim Geithner criticised bonus payments at AIG as "outrageous" and the action taken at the insurer as "an outrageous failure of policy", the FT reports.
"What happened in AIG was an outrageous failure of policy," said Mr Geithner as he brought up the matter himself. "As a country we should have never let a company take on a scale of risk that could threaten the stability of the financial system."
"Now, if you join with us in passing this proposed fee on our largest financial institutions ... you'll be able to say that the American taxpayer will not pay a penny for what happened at AIG," he said.
Should never have been permitted
AIG will pay about $100m to 200 staff at its financial products unit after they agreed to reductions in their pay-outs. "Those contracts were outrageous," said Mr Geithner. "They should never have been permitted."
He praised Ken Feinberg, the administration's special master on pay, as a "brave, smart, tough man. He did a very good job of negotiating down those payments." The scheduled pay-outs were reduced by $20m.
Dow Jones added that pay czar Feinberg told Fox Business that 2009 bonuses paid this year will figure into his pay package calculations for 2010. His aim is to make sure the unit pays back all of the $45m it received from taxpayers under the Troubled Asset Relief Program (TARP).
End of retention problem
"Under the law that I'm administering, I will do what I can in 2010 compensation, where I do have jurisdiction, to try and make sure these retention payments are taken into account when I set prospective pay in 2010.
“But I'm not prepared to challenge contracts entered into years ago," Feinberg said. "This is the end of the retention contract problem."
Feinberg reasserted his intention that top executives at TARP firms be limited to a $500,000 base salary, with any bonuses to be paid in stock.
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