UPDATED 1:30 p.m. eastern
WASHINGTON--President Obama said Monday he will ask AIG to cancel $165 million in bonus payments paid to traders for the bailed out AIG.
Obama--at the top of a small business event at the White House--said it was "hard to understand" why the bonus money should be paid.
"Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama said.
Obama asked Treasury Secretary Timothy Geithner to pursue every legal avenue to curb the payments. Last week, Geithner negotiated with AIG CEO and chair Edward Libby and won some concessions--but concluded he had no legal way to break the contracts of some 400 AIG Financial Products employees.
"Now, before I talk about the new steps that we're taking to get
credit flowing to small businesses across our country, I do want to
comment on the news about executive bonuses at AIG. I think some of
you have heard a little bit about this over the last few days," Obama said.
"This is a corporation that finds itself in financial distress due
to recklessness and greed. Under these circumstances, it's hard to
understand how derivative traders at AIG warranted any bonuses, much
less $165 million in extra pay. I mean, how do they justify this
outrage to the taxpayers who are keeping the company afloat?
"In the last six months, AIG has received substantial sums from
the U.S. Treasury, and I've asked Secretary Geithner to use that
leverage and pursue every single legal avenue to block these bonuses
and make the American taxpayers whole.
"I want -- I want everybody to be clear that Secretary Geithner
has been on the case. He's working to resolve this matter with the
new CEO, Edward Liddy -- who, by the way, everybody needs to
understand, came onboard after the contracts that led to these bonuses
were agreed to last year. But I think Mr. Liddy, and certainly
everybody involved, needs to understand this is not just a matter of
dollars and cents; it's about our fundamental values.
"Now, all across the country, there are people who are working
hard and meeting their responsibilities every single day -- without
the benefit of government bailouts or multi-million-dollar bonuses.
You've got a bunch of small-businesspeople here, who are struggling
just to keep their credit line open. They are foregoing pay, as one
of our entrepreneurs talked about. They are, in some cases,
mortgaging their homes, and doing a whole host of things, just in
order to keep things afloat. All they ask is that everyone -- from
Main Street to Wall Street to Washington -- play by the same rules.
And that is an ethic that we have to demand.
"And what this situation also underscores is the need for overall
financial regulatory reform, so we don't find ourselves in this
position again, and for some form of resolution mechanism in dealing
with troubled financial institutions, so that we've got greater
authority to protect American taxpayers and our financial system in
cases such as this.
"You know, we already have," Obama said coughing, "resolution authority --
excuse me. I'm choked up with anger here," he said to laughter.
"We always -- already have some of that resolution authority when it
comes to a, a traditional bank. But when you start getting into
AIGs and some of these other operations that have a whole bunch of
different financial instruments, then we don't have all the regulatory
power that we need. And this is something that I expect to work with
Congress to deal with in the weeks and months to come."
Liddy politely called the exchange an "open and frank conversation" in a letter he sent Saturday to Geithner about how AIG's "hands are tied.
SMALL BUSINESS NEWS:
The Obama White House announced that the Treasury will buy up to $15 billion in securities in order to jumpstart lending for small business by unlocking frozen credit streams.