Treasury sets AIG expenses

The US Government has forced AIG to issues new, frugal expenses guidelines to staff and placed strict limits on executive pay, according to Reuters.

The agency claims to have a letter from Federal Reserve Chairman Ben Bernanke to Senator John Kerry. It says that the new expenses policy was set by the US Treasury and "may be materially amended only with the prior written consent of the Treasury.”

Bernanke said the Fed can insist that AIG meet minimum corporate governance standards, monitor its financial condition and "restrict certain major decisions that might reduce the ability of AIG to repay its loan" from the Fed.

He said the Fed routinely makes its views known to AIG.

"Last fall, for example, we made clear to AIG's management our deep concern about reported incidents of corporate spending and questions surrounding certain executive compensation." The letter says, referring to an incident in October when AIG execs spent $200,000 on hotel rooms and $23,000 on spa services at an event.

The Treasury has also forced AIG to cancel meetings, conferences and other events not clearly needed for business.