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Fallout: The Financial Crisis

AIG in hot water over bonuses, again

Steve Henn Oct 14, 2009
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Fallout: The Financial Crisis

AIG in hot water over bonuses, again

Steve Henn Oct 14, 2009
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TEXT OF INTERVIEW

Steve Chiotakis: Just when you thought the brouhaha over lavish bonuses at AIG was finally behind us,
there’s this report coming today from the Special Inspector General overseeing the bailout there. It says executives at the troubled insurance giant are clashing with government officials over bonuses, again. Marketplace’s Steve Henn is with us live from Washington with the latest. Good morning Steve.

Steve Henn: Morning.

Chiotakis: So before we get into the details, what has the government done so to reign in bonuses at AIG?

Henn: Well, you remember the government named a pay czar, Kenneth Feinberg. He approved bonuses and salaries not only just at AIG, but all companies that got extraordinary assistance. And then last spring, AIG employees agreed to pay back some $45 million in bonuses that they were paid in March. But according to Feinberg, the company’s gotten back less than half that. And that’s not the only problem. AIG plans to pay nearly $200 million in bonuses next year.

Chiotakis: And who’s going to get all that money?

Henn: Well, employees at AIG’s financial-products unit. These are the folks who lost control of a series of derivative trades and nearly brought down the company last year. And serverely damaged the global-financial system.

Chiotakis: And can’t Kenneth Feinberg stop this?

Henn: Well, you’d think. But these bonus plans were written into employment contracts before thefeds bailed AIG out. So they’re legally binding. One option Feinberg does have is to slash 2009 salaries to make up for the planned bonus payments.

Chiotakis: But if I was in line for a million-dollar bonus, I’m not sure I’d care about salaries?

Henn: Well, that’s true. And AIG’s argument has always been that these payments are necessary to hold onto derivative traders, that it needs to unwind its tremendously complex book of business. But according to the report to be released today, bonuses were pretty widespread. Lots of folks got them, even folks without special skills, including a kitchen assistant, who received more than $7,000 last year.

Chiotakis: All right. Marketplace’s Steve Henn joining us from Washington. Steve, thanks.

Henn: Sure thing.

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